An IMGW News Report
Paris remains an appealing city for foreign investors. When considering real estate investments, rental yield—defined as the annual return from renting out a property—is a crucial metric.
Higher yields signify better returns, a key consideration for any savvy investor. To illustrate, purchasing a property for €500,000 and earning a monthly rent of €2,000 (or €24,000 annually) results in a gross annual rental yield of 4.8%. After accounting for taxes and other administrative expenses, the net yield will be lower.
Consider an individual aiming to maximise their rental income in the European property market. Their primary challenge is pinpointing the best location in which to invest. To aid their decision, let’s delve into the latest data from the Global Property Guide, updated as of Q1 2024, to uncover which European countries and cities offer the best and worst property rental yields.
Top 10 European Countries by Rental Yield
Latvia, Ireland, and Italy top the list with very robust average rental yields, signaling prime opportunities for investors. Latvia, with its rental yield of 8.06%, stands out as the highest in Europe. If current rental yields remain stable, it would take approximately 12 years of rental income to recoup an initial property investment in Latvia. In Ireland and Italy, the time required would be 13 and 14 years, respectively.
- Latvia – 8.06%
- Ireland – 7.85%
- Italy – 7.38%
- Romania – 6.63%
- Lithuania – 6.44%
- Turkey – 6.36%
- United Kingdom – 6.21%
- Spain – 6.17%
- North Macedonia – 6.00%
- Montenegro – 5.95%
Top 10 European Cities by Rental Yield
When focusing on major European cities, Dublin emerges as the leader with an average rental yield of 7.33%. In Dublin, two-bedroom units represent a lucrative investment. An individual would need to invest €365,000 to generate a monthly rent of €2,500, resulting in yields of up to 8.22%. Istanbul and Riga are also attractive options, with average rental yields of 6.6% and 6.5%, respectively.
- Dublin, Ireland – 7.33%
- Istanbul, Turkey – 6.63%
- Riga, Latvia – 6.46%
- Bucharest, Romania – 6.36%
- Podgorica, Montenegro – 5.7%
- Lisbon, Portugal – 5.65%
- London, UK – 5.59%
- Brussels, Belgium – 5.54%
- Warsaw, Poland – 5.51%
- Vilnius, Lithuania – 5.47%
Worst 10 European Countries by Rental Yield
Luxembourg, offering the lowest yield at 2.67%, is the least attractive for property rental income. In Luxembourg, a two-bedroom apartment has an average purchase price of €1.2 million. However, with an average monthly rent of €2,800, this investment yields a gross rental return of just 2.7%. In Luxembourg, an individual would take an average of 37 years to pay back their initial housing investment through rents, assuming constant yields. Switzerland follows closely, requiring 33 years to break even. Real estate investors aiming to maximise returns might want to steer clear of these markets.
- Luxembourg – 2.67%
- Switzerland – 3.05%
- Austria – 3.59%
- Malta – 3.66%
- Germany – 3.74%
- Norway – 3.79%
- Czech Republic – 3.95%
- Denmark – 4.16%
- Belgium – 4.20%
- Finland – 4.24%
Worst 10 European Cities by Rental Yield
Oslo ranks lowest with a mere 2.46% average rental yield. For instance, a one-bedroom apartment costing an individual €379,731 would only garner an average monthly rent of €894, resulting in a yield of just 2.83%. Zurich ranks as the third least attractive European city for property rental income. An individual would need to invest €1.1 million to buy a two-bedroom flat in Zurich, but with an average monthly rent of €2,538, the gross annual yield is only 2.8%.
- Oslo, Norway – 2.46%
- Luxembourg, Luxembourg – 2.71%
- Zurich, Switzerland – 2.79%
- Vienna, Austria – 3.64%
- Valletta, Malta – 3.67%
- Helsinki, Finland – 3.8%
- Berlin, Germany – 3.83%
- Sofia, Bulgaria – 4.04%
- Prague, Czech Republic – 4.05%
- Bratislava, Slovak Republic – 4.11%
Oslo has the lowest rental yield among European cities at 2.46%, making it the least attractive for investors looking for rental income. Other cities like Luxembourg and Zurich also offer low yields, indicating a slower return on investment.
Summary
For savvy investors looking to maximise rental income, focusing on countries like Latvia, Ireland, and Italy, and cities such as Dublin, Istanbul, and Riga, could offer the best opportunities in 2024. Conversely, investors may want to avoid markets with lower yields like Luxembourg, Switzerland, and Austria, as well as cities such as Oslo, Zurich, and Vienna.
If you found this IMGW Report of interest, we recommend you read the following:
- European Real Estate Market Records First Decline in a Decade
- What’s Shaping the Future of Real Estate in 2024? Time to Factor in the Impact of Investment Migration on the Sector?