Property investment in Europe is gaining momentum, particularly in Central and Eastern European countries, where Lithuania and Hungary are leading the pack in terms of return on investment (ROI).
A recent study by UK relocation company 1st Move International analyzed several factors—such as rental yields, property taxes, and income tax on rental income—to determine the best countries for property investment in 2025.
Lithuania emerges as the top choice for real estate investors. According to the Global Property Guide, the capital, Vilnius, offers an impressive average rental yield of 5.65%. Rental prices in Lithuania have surged by more than 170% since 2015, as reported by the OECD. The country has a moderate 15% income tax on rental income, and foreigners face no restrictions on property ownership. Additionally, property prices saw an increase of over 10% in the second quarter of 2024 compared to the previous year, indicating strong investment potential moving forward.
Estonia ranks as the second-best property investment destination. Like Lithuania, non-residents can buy property in the country. Estonia benefits from relatively low taxes and high rental prices, yielding an annual gross rental return of approximately 4.5%. The income tax on rental income is set at 20%. Property prices rose by 6.7% in the year leading up to June 2024, signaling further value growth.
Romania follows closely in third place, offering a low-cost investment environment and a very attractive rental tax rate of just 10%. With a relatively high annual rental yield of 6.46%, Romania’s property market is proving to be a solid option for investors.
Ireland is another promising country for property investment, particularly due to high rental yields driven by ongoing housing shortages. However, high property taxes may reduce net returns for investors. The country’s housing crisis has led to soaring prices, making it an attractive yet challenging market.
Several other Central and Eastern European countries, including Hungary, Slovenia, and Poland, offer favorable conditions for property investment. Hungary, for example, has seen rental prices increase by 180% since 2015. In the 12 months leading up to June 2024, property prices in Poland rose by 17.7%, in Hungary by 9.8%, and in Slovenia by 6.7%, according to Eurostat.
On the other hand, countries like Belgium, France, and Greece are less favorable for property investment, with high taxes and costs associated with buying and renting. Belgium, for instance, has some of the highest transaction costs in Europe, and rental income tax can reach up to 50%. France’s property market is burdened by high taxes and a relatively low annual rental yield of around 4.5%, while Greece faces similarly high property buying costs and a rental income tax rate exceeding 33%.
Spain and Portugal are two of the most searched countries for property investment, according to Google search data, with Spain leading the way with 279,000 searches between 2023 and 2024. Spain offers favorable tax benefits for non-resident property investors, with a tax rate of 19% for EU/EEA citizens and 24% for non-EU citizens. Portugal ranks second, with over 270,000 searches. Foreigners can buy property in Portugal under the same conditions as locals, although rising housing prices—up nearly 70% since 2015—have contributed to a housing shortage.
In conclusion, while Spain and Portugal remain popular investment destinations, Lithuania, Estonia, and Romania are emerging as top choices for those seeking high returns and favorable tax conditions in 2025.
