Looking to Buy Property in Europe? The Highest and Lowest Property Taxes Revealed

If you’re considering investing in property in Europe, you may want to pay close attention to tax rates, rental yields, and the associated costs of buying and renting. A new report from UK relocation company 1st Move International sheds light on the best and worst places for property investments in Europe. According to the report, Central and Eastern European countries offer the most attractive opportunities, while Western European nations like Belgium and France are seen as less favorable for investors.

Central and Eastern European countries top the list for property investment, while Western Europe sees lower rankings due to high taxes. Photo: Unsplash

Best Places to Invest in Property in Europe

1. Lithuania Lithuania tops the list for property investment, with its capital Vilnius offering an impressive 5.65% average rental yield, according to the latest data from Global Property Guide. Rent prices have surged by 170% since 2015, as reported by the OECD, making the market highly favorable for investors. With a 15% income tax on rent and no restrictions for foreign buyers, Lithuania’s real estate market is experiencing steady growth, with property prices up by more than 10% in Q2 2024 compared to the previous year. This trend is expected to continue, providing a strong return on investment.

2. Estonia Ranked second, Estonia’s real estate market is also booming. With low transaction costs (around 1.3%) and a respectable 4.5% gross rental yield, non-residents are welcomed to buy property in the country. Property prices in Estonia rose by 6.7% up to June 2024, making it a solid investment opportunity. However, the 20% income tax on rentis slightly higher than in Lithuania but remains manageable given the market growth.

3. Romania Romania rounds out the top three, offering 6.46% gross rental yields—one of the highest in Europe. Investors benefit from low transaction costs and a remarkably low 10% income tax on rent, making Romania an attractive option for those seeking high returns. Additionally, property prices in Romania remain relatively affordable compared to other European markets, making it a lucrative destination for property investors.

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Worst Places to Invest in Property in Europe

1. Belgium Belgium ranks as one of the least favorable countries for property investment. The transaction costs in Belgium are some of the highest in Europe, and the income tax on rent can soar to 50%, severely cutting into investors' profits. Despite 4.2% rental yields, the country’s real estate market struggles with high taxes, making it less appealing. Property prices have only increased by 3.4% year-on-year in Q2 2024, limiting potential for growth.

2. France France is also seen as a challenging market for property investors. The country’s real estate taxes and buying costs are relatively high, with a rental income tax of 18.28% and gross rental yields around 4.5%. However, property prices in France have actually declined by 4.6% this year, according to Eurostat, further diminishing its attractiveness for investors.

3. Greece Greece ranks third-worst, mainly due to its high purchasing costs and elevated income tax rates, which exceed 33%. Although Greece's property market offers opportunities in popular tourist areas, the high taxation on rental income makes it less favorable for long-term property investment.

Property Investment Trends: What Google Tells Us

The report also looked at Google search trends to gauge where people are most interested in buying property. Spaintopped the list with over 279,000 global searches for property-related queries between 2023 and 2024. Spain offers attractive non-resident tax benefits, with a standard rate of 19% for EU/EEA citizens and 24% for non-EU residents. However, the surge in popularity has caused a chronic housing shortage, pushing prices up by almost 70% since 2015.

Portugal was the second-most searched destination, with over 270,000 searches related to property investment. Portugal allows foreigners to purchase property under the same conditions as locals, but like Spain, the rising popularity has driven property prices up significantly in recent years, making affordability a growing concern for locals.

For those looking to invest in property in Europe, Central and Eastern European countries like Lithuania, Estonia, and Romania offer some of the best opportunities due to moderate taxes, high rental yields, and favorable market trends. Meanwhile, Belgium, France, and Greece rank among the worst places for property investment, mainly due to high taxes and lower yields. As always, potential investors should conduct thorough research and consult financial advisors to ensure a successful investment strategy.

Source: Euronews