When it comes to making money in property, the concept of ‘rental yield’ is paramount. This is the annual return you earn from renting out a property, expressed as a percentage of the property’s purchase price. For investors, a higher rental yield translates to better returns on investment. So, if you’re thinking about investing in property across Europe this year, knowing where the yields are highest and lowest could be crucial.
According to the latest data from the Global Property Guide for the first quarter of 2024, certain European countries are proving to be gold mines for investors.
Top Countries for Rental Yields:
- Latvia leads the pack with an impressive rental yield of 8.06%. Investing in Latvia means that it could take around 12 years to recoup your initial investment through rental income alone.
- Ireland follows closely with a yield of 7.85%, taking roughly 13 years to break even.
- Italy offers a yield of 7.38%, with a recovery period of about 14 years.
Other notable countries include Romania, Lithuania, Turkey, the United Kingdom, Spain, North Macedonia, and Montenegro, with yields ranging from 6.63% down to 5.95%.
Top European Cities for Investors:
Zooming in on cities, Dublin, Ireland, shines brightest with a rental yield of 7.33%. An investment in a two-bedroom unit there could generate as much as 8.22% yield if purchased for around €365,000.
Other cities with attractive yields include:
- Istanbul, Turkey – 6.63%
- Riga, Latvia – 6.46%
- Bucharest, Romania – 6.36%
- Podgorica, Montenegro – 5.7%
This list highlights cities where investors can potentially earn high returns on property investments, making them prime spots for investment.
Areas to Avoid in European Property Market
Conversely, some European locations offer significantly lower rental yields, making them less attractive from an investment perspective.
Lowest Yields in European Countries:
- Luxembourg sits at the bottom with a mere 2.67% yield. For a two-bedroom apartment costing €1.2 million, the average monthly rent of €2,800 barely makes a dent, yielding just 2.7%.
- Switzerland isn’t far behind, requiring an average of 33 years to break even with a yield of 3.05%.
This list also includes Austria, Malta, Germany, Norway, Czech Republic, Denmark, Belgium, and Finland, where the yields range from 3.59% to 4.24%.
Cities to Steer Clear Of:
In terms of cities, Oslo, Norway, has the lowest yield at just 2.46%. An investment of €379,731 in a one-bedroom apartment returns an average rent of €894 per month, resulting in a yield of only 2.83%.
Other cities with low yields include:
- Zurich, Switzerland – 2.79%
- Vienna, Austria – 3.64%
- Valletta, Malta – 3.67%
These locations represent the less profitable end of the spectrum for property investors looking to maximize rental income.
For savvy investors aiming to maximise rental income, focusing on high-yield locations like Latvia, Ireland, and select cities such as Dublin and Istanbul can be a smart move. Conversely, markets like Luxembourg and Oslo should perhaps be approached with caution due to their low returns. As always, thorough research and consideration of long-term trends are key before committing to any property investment.