In which countries is it best to invest in real estate? An overview of 5 popular destinations

Which countries are more profitable to invest in real estate now? Where will the income from renting apartments be higher, and where will it be lower? These questions can be answered by determining the return on investment (ROI) in different countries. We took 5 popular countries and analyzed their ROI indicators, thus finding out where the return on investment would be higher.

The ROI (Return on Investment) indicator measures how much money or profit is received from investments as a percentage of the value of these investments. In the case of real estate, this is the ratio of income expressed by the average rental rate to the average price of an apartment.

How to calculate ROI in real estate?

To calculate the return on investment in real estate, you need to take the annual rental income minus property taxes, insurance costs and other expenses in this property, and then divide it by the total amount of investment that you invested in the object at the very beginning.

For example, you spent $110,000 to buy an apartment and cover additional expenses, and the annual rental income (after deducting expenses for property taxes, insurance and other expenses) was $9,600. This means that your ROI will be 8.7% (US$9,600 – US$ 110,000). 

So, let’s move on to our analysis.

Poland

The average cost of a one-bedroom apartment (50 sq. m.m) in the center of Polish cities is about 200,000 USD (the cost of one square meter is about 4000 USD); outside the center, the cost of an apartment is 140,000 USD (a “square” costs about 2800 USD).

The cost of renting a one—bedroom apartment in the center of Polish cities is 770 USD, outside the center – 610 USD.

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In Poland, income from renting out housing is taxed at a fixed rate. Rental income of up to 100,000 PLN per year (about 25,500 USD) is taxed at a rate of 8.5%. Rental income that exceeds this threshold is taxed at a rate of 12.5%.

So, the return on investment (ROI) in Poland, or, in other words, the gross rental income of real estate as a percentage:

• ROI (in the city center): 4.23%
• ROI (not in the center): 4.78%

ROI in the largest cities of Poland:

Czech

The average cost of a one-bedroom apartment (50 sq. m.m) in the center of Czech cities is about 240,000 USD (the cost of one square meter is about 4800 USD); outside the center, the cost of an apartment is 180,000 USD (a “square” costs about 3600 USD).

The cost of renting a one-bedroom apartment in the center of Czech cities is 850 USD, outside the center — 670 USD.

In the Czech Republic, income from renting out housing is subject to income tax. Income from renting out real estate up to CZK 1,582,812 per year (about USD 70,000) is taxed at a rate of 15%. Rental income that exceeds this amount is taxed at a rate of 23%.

Return on investment (ROI) in the Czech Republic (gross rental income as a percentage):

• ROI (in the city center): 3.63%
• ROI (not in the center): 3.80%%

ROI in the largest cities of the Czech Republic:

Montenegro

The average cost of a one-bedroom apartment (50 sq. m.m) in the center of the cities of Montenegro is about 100,000 USD (the cost of one square meter is about 2000 USD); outside the center, the cost of an apartment is 78,000 USD (a “square” costs about 1560 USD).

The cost of renting a one-bedroom apartment in the center of Montenegro is 600 USD, outside the center — 450 USD.

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In Montenegro, rental income is taxed at a rate of 15%, while the costs incurred to generate income are deducted from the tax base. 

Return on investment (ROI) in Montenegro (gross rental income as a percentage):

• ROI (in the city center): 6.05%
• ROI (not in the center): 5.92%

ROI in the most popular cities of Montenegro:

Turkey

The average cost of a one-bedroom apartment (50 sq. m.m) in the center of the cities of Turkey is about 53,000 USD (the cost of one square meter is about 1060 USD); outside the center, the cost of an apartment is 32,000 USD (a “square” costs about 640 USD).

The cost of renting a one—bedroom apartment in the center of Turkish cities is 330 USD, outside the center – 230 USD.

In Turkey, income from renting out residential real estate is subject to a progressive tax, the rate of which depends on the amount of income. Incomes up to 33,000 Turkish liras (about 1025 USD) are exempt from taxes, incomes from 33,000 to 70,000 Turkish liras are subject to 15% tax, from 70,000 to 250,000 Turkish liras are subject to 20% tax, from 250,000 to 880,000 Turkish liras are subject to 27% tax.

Return on investment (ROI) in Turkey (gross rental income as a percentage):

• ROI (in the city center): 6.43%
• ROI (not in the center): 7.76%

ROI in the largest cities of Turkey:

United Arab Emirates

The average cost of a one-bedroom apartment (50 sq. m.m) in the center of the UAE cities is about 160,000 USD (the cost of one square meter is about 3,200 USD); outside the center, the cost of an apartment is 110,000 USD (a “square” costs about 2,200 USD).

The cost of renting a one-bedroom apartment in the center of the UAE cities is 1,650 USD, outside the center — 1,100 USD.

How to buy a property in the UAE

There is no tax on rental income in the UAE, instead there are municipal taxes that are paid by the tenant, municipal taxes depend on the location — each emirate has its own amount of rent. 

Return on investment (ROI) in the UAE (gross rental income as a percentage):

• ROI (in the city center): 12.38%
• ROI (not in the center): 12.00%

ROI in the largest emirates of the UAE:

To summarize: the United Arab Emirates is the leader in terms of return on investment (ROI) among the analyzed countries — depending on the city, in the UAE you can expect an average of 6-9% in the city center and 5-10% outside. Other countries look less attractive against the background of the UAE, but it is worth considering that these are average indicators, and, as with any other investment, investing in real estate should take into account many factors to maximize benefits.

Author

Roman Tomashevich Analyst

I show the situation on the real estate market in graphs and figures.

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