House rents in Portugal continue to rise, at a faster pace than in other European markets. This makes residential rentals an attractive business for investment in our country. In fact, Lisbon is among the European capitals where renting a house was most profitable in June of this year.
Looking at 32 European countries, Global Property Guide found that Lisbon is the 6th most profitable European capital to invest in housing for rental purposes. According to the calculations of the international real estate consultancy, the gross rental yield in Lisbon stood at 5.65% at the end of June this year.
There are, therefore, five European capitals where it is more profitable to rent a house than in Lisbon. In first place is Dublin (Ireland), with an average gross rental yield of 7.33%, followed by Rome (6.82%), Riga (6.46%), Bucharest (6.3%), and Podgorica (5.7%).
The European capitals where it is least profitable to buy a house for rental are Oslo, in Norway (2.46%) and Luxembourg (2.58%), according to the same data.
Aside from the European capitals, the real estate consultancy also analysed the average yield in other Portuguese cities. It concluded that in Setúbal, investing in a house for rental offers an average yield of 6.51%, which is higher than in Lisbon. Meanwhile, Porto, Faro, Aveiro, and Braga showed average yields above 5%, but below the Portuguese capital, reports Público.
It is also worth noting that the calculated yield takes into account the tax burden in each country. In Portugal, rental income from housing became subject to an autonomous tax rate of 25% (down from 28%) for short-term rental contracts since last October, with the implementation of the Mais Habitação (More Housing) programme. This rate can be further reduced if the rental contract exceeds 3 years.
The comparison of the tax burden on residential rentals across European countries is not straightforward, as some markets have a flat rate and others have progressive rates. However, according to the same publication, it is possible to infer from the data that Portugal ranks around the middle of the table in terms of the tax burden on rental income, in line with other countries. As such, the rental prices in our country help offset the tax burden.
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