Lisbon excels in Europe's rental market
House rents in Portugal continue to rise at a faster rate than in most other European markets, making residential rentals an increasingly attractive investment opportunity. In fact, Lisbon is now one of the top European capitals where renting out property proved most profitable as of June this year.
According to a study by Global Property Guide, Lisbon ranks as the 6th most profitable capital in Europe for property investors focused on rentals. The analysis, which spanned 32 European countries, found that Lisbon had a gross rental yield of 5.65% at the end of June.
Five European capitals, however, offer higher returns than Lisbon. Dublin (Ireland) leads with an average gross yield of 7.33%, followed by Rome (6.82%), Riga (6.46%), Bucharest (6.3%), and Podgorica (5.7%).
At the lower end of the spectrum, the least profitable capitals for buying property to rent are Oslo, Norway (2.46%), and Luxembourg (2.58%).
Lisbon ranks as the 6th most profitable European capital for purchasing a property to rent out.
Looking beyond European capitals, the report also highlights other Portuguese cities. In Setúbal, for example, investing in rental property yields an average return of 6.51%, outperforming Lisbon. Cities like Porto, Faro, Aveiro, and Braga also recorded yields above 5%, though slightly lower than the capital, according to data from Público.
It’s important to note that these yields take into account the tax burden in each country. In Portugal, rental income is now taxed at a reduced autonomous rate of 25% (down from 28%) for short-term leases under the "Mais Habitação" (More Housing) program implemented last October. For rental contracts lasting longer than 3 years, further tax reductions may apply.
Comparing the tax burden on rental income across European countries can be complex, with some countries using flat rates and others applying progressive rates. Nevertheless, Portugal is positioned roughly in the middle of the spectrum in terms of taxation on rental income. Despite the tax obligations, the increasing rental prices help to compensate, maintaining Portugal’s appeal for property investors.
Disclaimer: The views expressed above are based on industry reports and related news stories and are for informational purposes only . SSIL does not guarantee the accuracy, legality, completeness, reliability of the information and or for that of subsequent links and shall not be held responsible for any action taken based on the published information.