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Property Investment in Europe

Property Investment in Europe

This article discusses property investment in Europe member states and the various opportunities it offers through case studies.

Information about Property Investment in Europe

Property Investment in Europe has long been seen as a very attractive opportunity for those who want to invest their money and thus obtain various rights. By investing in real estate, they can increase their economic power in EU countries, which have a stable economic order where the Euro is used. 

So far we have assisted over 400 companies.

The fact that many EU member states, especially Hungary, offer residence opportunities under favorable conditions to those who invest in real estate makes this opportunity valuable.

Property Investment in Europe
Property Investment in Europe

Some of the details that make real estate investment attractive in European Union countries are as follows:

  1. a) High Returns on Investment 
  2. b) Tourism and Cultural Appeal
  3. c) Stability and Security

People investing in property investment in Europe can look to the future with confidence, thanks to the EU’s stable political and economic conditions. High rental yields in touristic areas and metropolitan cities also make this option suitable. Apart from all these, investors who want to obtain residence or citizenship are also engaged in real estate investment in EU countries.

General Property Investment in Europe and Stages

Property Investment in Europe generally includes the following stages:

  1. There is a sales contract concluded between the seller and the buyer
  2. The contract must be notarized
  3. Payment of the relevant security value to the buyer or depositing it into his account
  4. Registration in the land registry for the ownership to be transferred to the buyer.

Property Investment in Europe and Its Advantages Based on Sample Countries

In Europe, laws regarding foreign citizens purchasing property vary by country. While there isn’t a blanket prohibition, some nations impose restrictions. In Andorra, Hungary, Denmark, Iceland, Poland, and Malta, foreign investors need approval from local authorities before purchasing property. These regulations often touch on residency status, property type, or buyer category.

The Czech Republic has a residence permit program that allows investors to obtain a residence permit by investing in real estate, provided they meet certain criteria

Estonia’s e-residency program offers a digital residency option, allowing investors to manage their business remotely while enjoying the benefits of EU residency

In Portugal, Golden Visa program allows non-EU citizens to qualify for a residency permit and eventually a passport in the country through investments.

Our team will help you at every stage of property investment in Europe. Feel free to reach out to us through the following contact information:

E-MAIL: info [@] gurcanpartners.com

Minimum Wages of the Property Investment in Europe

Foreigners often work in jobs other than their main speciality and earn the minimum wage.

The Europa Jobs report provides up-to-date data on minimum wages in different EU countries in 2023. 

Group 1:

  1. Bulgaria: 399 euros;
  2. Hungary: 579 euros;
  3. Romania: 606 euros;
  4. Latvia: 620 euros;
  5. Croatia: 700 euros
  6. Slovakia: 700 euros
  7. Czech Republic: 717 euros
  8. Estonia: 725 euros;
  9. Poland: 746 euros;
  10. Malta: 835 euros;
  11. Lithuania: 840 euros.

Group 2:

  1. Portugal: 887 euros;
  2. Spain: 1167 euros;
  3. Slovenia: 1304 euros.

Group 3:

  1. France: 1709 euros;
  2. Ireland: 1910 euros;
  3. Netherlands: 1934 euros;
  4. Belgium: 1955 euros;
  5. Germany: 1981 euros;
  6. Luxembourg: 2,387 euros.

Property Investment in Europe: Hungary and Golden Visa Opportunity

In Hungary, the largest real estate website is (Real Estate in Hungary, properties for sale and rent! (realestatehungary.co.hu)) Real Estate Hungary, which offers a wide range of properties to choose from.

According to Hungarian Law, property purchases shall be concluded through a purchase agreement countersigned by a lawyer.

Do Foreigners Need a Permit to Buy Property in Hungary?

Citizens of the European Union do not need any permission when they want to buy real estate in Hungary.

Those who are not European Union citizens must obtain this permit. The first step for this permission is to sign the sales contract.

The ‘guest investor residency’ (Hungary Investor Visa / Hungary Golden Visa) regulation, which was approved by the Hungarian Parliament and will enter into force on July 1, 2024, offers attractive conditions for those who want to invest in real estate in Hungary and grants a residence permit for 10 years. 

The application process of the program consists of two stages: guest investor visa and residence permit. Investment options include 1) a real estate fund of €250,000, 2) a direct investment of €500,000 in residential real estate, or 3) a donation of €1,000,000 to public benefit projects.

You must first declare that you will invest and apply for a guest investor visa valid for a maximum of two years, and after the investment, you must apply for a guest investor residence permit for 10 years.

Requirements for Residency by Real Estate in Hungary:

  1. a) Being a citizen of a non-EU country and having a valid passport,
  2. b) Be able to invest at least EUR 250,000 (if Bond),
  3. c) to be able to pass a mandatory national security check by the Hungarian authorities,
  4. d) Make the investment within 3 months, (in case you get a guest investor visa, you have to make the investment within 90 days after entering Hungary),
  5. e) Having sufficient economic power to stay in Hungary.

At Gurcan Partners, we can help you make informed decisions regarding your Property Investment in Europe by informing you about the complexities and the latest developments in the legal procedures for buying real estate in Hungary. If you have any questions orrequire further guidance, please feel free to contact us via email at info [@] gurcanpartners.com.

A guest investor visa entitles the holder to stay for more than 90 days within 180 days and apply for a guest investor permit.

Third country nationals will be able to obtain this visa if they have or declare to have sufficient investment.

The guest investor visa is valid for a maximum of two years. A guest investor visa is invalid if a guest investor residence permit has already been issued.

Guest investor residence permit, (Golden Visa/Residency)

This type of residence permit gives the holder the right to reside and work unrestrictedly in the territory of Hungary.

The investor’s family will also be eligible for the same residency under the Hungary Investor Residency Program.

 

Property Investment in Europe: Germany

Property investment in Europe – Germany can be a solid long-term strategy despite high prices, especially in urban areas where demand consistently outstrips supply and interest rates remain low. Germany is particularly enticing to global investors due to its educated workforce, stable economy and politics, well-developed infrastructure, and openness to foreign property buyers. With its high quality of life, diverse real estate options, and historical market resilience, Germany offers a secure investment environment. Moreover, its central location in Europe and cultural richness enhance its appeal further.

Property investment in Europe – Germany is particularly attractive due to a significant portion of the population renting rather than owning property, ensuring continued growth in house prices due to persistent demand. The country’s buy-to-let mortgage system is notably favorable, offering numerous tax benefits. Property values tend to appreciate steadily, while rental income often exceeds mortgage interest payments, making buy-to-let properties an attractive option for bolstering retirement income. Compared to keeping savings in low-interest bank accounts, investing in real estate in Germany offers the potential for higher returns and increased financial security.

  • Property Investment in Europe – Germany does not facilitate the acquisition of a residence permit or citizenship.

Here are some of the main benefits of buying property in Germany: 

  • a very stable rental market,
  • stable political environment,
  •  a strong economy with solid household income in the heart of Europe,
  • fixed interest rates and tax advantages,

 In October 2023, if you wanted a mortgage for 5 to 10 years, you could get a low rate of 3.85%.

But if you were considering a floating rate mortgage lasting up to a year, it would be more expensive at 5.53%. The most popular choice among homebuyers was mortgages in Germany with a fixed period of over 10 years, which had an interest rate of 3.9%.

  • How much does a property cost in Germany?

The median selling price for apartments in Germany in 2024 is approximately €4,741 per square meter, indicating an equal distribution of properties priced higher and lower than this figure. For houses, the median price stands at €3,139 per square meter.

In Berlin, apartment prices are notably higher, averaging €8,307 per square meter in the city center and €6,056 per square meter outside the city center. Similarly, in Hamburg, apartment prices average €8,237 per square meter in the city center and €5,299 per square meter outside the city center.

Cities like Leipzig and Düsseldorf are recognized for their affordability in the German real estate market.

According to data from Numbeo.com, the average price per square meter in the city center of some major cities is approximately €6,043, while outside the city center, it’s around €5,018 per square meter.

  • What are the additional costs of buying a property in Germany?

Investors should be mindful that various fees associated with property acquisition can accumulate to approximately 10% of the initial purchase price, or sometimes even more. These expenses typically include:

  • Notary and registry fees
  • Transfer tax, where applicable
  • Real estate agent commissions
  • Maintenance expenses
  • Property taxes

For instance, the real estate transfer tax typically ranges from 3.5% to 6.5% of the purchase price, while agent fees may amount to 3-7% and notary fees to 1.5-2% of the purchase price.

Property Investment in Europe: Poland

Foreigners have the freedom to purchase, sell, and lease apartments in Poland without restrictions. However, acquiring a land plot with a house requires permission from the Ministry of Internal Affairs of Poland.

Statistics demonstrate the investment’s liquidity, with residential real estate prices increasing by an average of 2.1% every quarter. For example, five years ago, a 100 m² apartment had an average price of €189,000, whereas today, it is being sold for €270,000.

Average price per 1 m² :€2,697 

Average price growth per quarter : 2,1%

Associated costs, of the property value : 2,35—29%

  • Property investment in Europe – Poland does not facilitate the acquisition of a residence permit or citizenship.

Taxes and associated costs for  PURCHASE

Property investment in Europe – Poland entails certain costs for buyers. Property buyers in Poland incur either a value-added tax for new constructions or a transfer tax for resale properties, along with additional fees. The total associated costs typically vary between 2.35% and 29% of the purchase agreement value. For instance, when purchasing a new apartment valued at €500,000, the investor can expect to spend €620,000, inclusive of additional costs.

  • Purchase expenses

New buildings — VAT 23% — of the transaction amount

Secondary housing — transfer tax 2% — of the transaction amount

Registration fee 0,1%

Notary fee — depends on the transaction amount 0.25—3%

Agency fee — if a real estate agency is involved in the transaction 3%

Taxes and associated costs for  OWNERSHIP

Property investment in Europe – Poland comes with specific tax obligations. Property owners in Poland are subject to an annual tax, determined based on the size of the property. The tax rate is set by regional governments, with a maximum limit of €0.17 per square meter of housing. Additionally, rental income is considered part of the taxable income base and is subject to a progressive income tax rate ranging from 18% to 32%.

  • Communal payments

Electricity, gas, water, heating, and garbage collection

€100—250 — per month

Internet, TV and telephone

€9—17 — per month

Taxes and associated costs for  SELLER

If the seller has owned a property for less than five years, they pay a capital gains tax of 19% on the difference between the sale and purchase prices. 

0—19% Capital gains tax on the sale of real estate in Poland

Property Investment in Europe: Czech Republic

Property investment in Europe – Czech Republic offers significant opportunities for foreigners, who have unrestricted rights to purchase, lease, and sell real estate in the country. Data substantiates the investment’s liquidity, with residential real estate prices increasing by an average of 3% every quarter. For instance, five years ago, a 100 m² apartment had an average price of €227,000, whereas today, it commands €399,000 when sold.

Average price per 1 m² :€3,988

Average price growth per quarter : 3%

Associated costs, of the property value :0,01—6,2%

  • Obtaining a Czech residence permit or citizenship is not connected with purchasing real estate.

Taxes and associated costs for PURCHASE

Property buyers in the Czech Republic are obligated to pay a compulsory registration fee. Moreover, they have the option to cover expenses for legal assistance and an agency fee, which constitutes a commission for real estate agency support.

The total associated costs typically range from 0.01% to 6.2% of the purchase agreement value. For instance, when purchasing an apartment valued at €1 million, the investor can anticipate spending approximately €1.04 million, inclusive of additional costs.

  • Purchase expenses

Registration fee €39

Legal support of the transaction — 1,2% — VAT included

Agency fee 2.5—5%

Taxes and associated costs for OWNERSHIP

  • Taxes

Property owners pay an annual tax of €0,07 to €2 per square metre of the property. The tax rate depends on the property type and location.

Rental income is included in the income tax of 15%

  • Communal payments

Electricity, gas, water, heating, and garbage collection €117—274 — per month

Internet, TV and telephone €14—25 — per month

Taxes and associated costs for SELLER

If the seller of real estate in the Czech Republic has owned the property for less than five years, they pay a capital gains tax of 15% on the difference between the sale and purchase prices. 

15% Capital gains tax on the sale of real estate in the Czech Republic

Property Investment in Europe: Serbia

Property investment in Europe – Serbia allows foreigners the right to purchase and sell properties in the country. Leasing is permitted based on the principle of reciprocity, meaning that if Serbian citizens are granted the ability to purchase properties in another country, citizens of that country can also buy properties in Serbia. The highest property prices in Serbia are typically found in the capital city, Belgrade.

Average price per 1 m² :€1,568

  • Serbia residence permit or citizenship by real estate investment:

Property investment in Europe – Serbia offers an attractive pathway to residency. Any owner of real estate, whether residential or commercial, is eligible to apply for a Serbia residence permit, irrespective of the property’s value. The initial permit is valid for one year, with the option of extension. To renew the permit, one must reside in Serbia for a minimum of 183 days annually. After five years of continuous residence with a valid permit, individuals may apply for citizenship.

Taxes and associated costs for PURCHASE

Property buyers in Serbia are subject to a value-added tax for new constructions or a transfer tax for resale properties, along with additional fees. These associated costs typically range from approximately 2.5% to 12% of the purchase agreement value, with an additional fee of €350 to €550.

For instance, when purchasing a new apartment valued at €500,000, the investor can expect to spend €560,550, inclusive of additional costs.

  • Purchase expenses

New buildings — VAT 10% — of the transaction amount

Resale housing — transfer tax 2,5% — of the transaction amount

Registration fee €50

Notary fee — depends on the transaction amount €300—500

Agency fee — the share paid by the buyer 2%

Taxes and associated costs for OWNERSHIP

  • Taxes

Property investment in Europe – Serbia comes with certain tax obligations. Property owners in Serbia are required to pay an annual property tax, which is calculated at a rate ranging from 0.2% to 1% of the cadastral value. This rate is determined based on several factors including the location (region and district within the region), year of construction, area, and cadastral value of the property.

Non-residents who earn rental income are subject to a flat 20% income tax on their rental yields.

  • Communal payments

Electricity, gas, water, heating, and garbage collection €85—200 — per month

Internet, TV and telephone €12—30 — per month

Taxes and associated costs for SALE

Sellers pay a capital gains tax of 20% on the difference between the sale and purchase prices.

The agency fee is 2%.

20% Capital gains tax on the sale of real estate in Serbia

Conclusion

As explained above, Property Investment in Europe requires following very comprehensive processes and obtaining rapid results. Property Investment in Europe not only provides financial profit but also provides residence or citizenship opportunities after various processes. In this context, it is strongly recommended that you consult Gurcan Partners regarding any issue you may have.

Alperen Turhal

Simge Ayse Pala LLBs

 

Sources:

Real Estate Investment In Hungary • Gurcan Partners
Property Prices Index by Country 2024 (numbeo.com)
Europe: Cost of Living Index by Country 2024 (numbeo.com)
at-deloitte-property-index-2023.pdf
House prices down, rents up between Q3 and Q4 2023 – Eurostat (europa.eu)
European limitations on foreign property purchases – Tranio.Com
Visit World – Ranking of European countries by salaries in 2024