International buyers generally purchase housing in Europe as a form of investment. Thus, compared to a long-term lease, a short-term lease is more appealing due to higher profitability (generally 5-7%), higher value increase potential and no problems with tenants’ eviction.
Profitability in the rental business depends firstly on location. According to a Tranio.com survey, the best European cities for residential property investment for the purpose of short-term rent are Budapest, Prague and Lisbon.
This conclusion is based on the results of an analysis of the 22 most-visited European cities (more than two million tourists per annum), based on the information about legal limitations for short-term leases, increases in the amount of tourists, occupancy rates, rent and purchase costs and rental and income taxes.
Out of Tranio.com’s top seven cities for short-term leases, the lowest prices for real estate can be found in Budapest (1,500 EUR/sq m on average), along with the highest profitability (10.2% yearly) and one of the lowest rental income taxes (16%). Budapest was visited by 4.5 mln tourists in 2015.
The Belváros-Lipótváros area of Budapest is considered to be the best for short-term leases, being abundant in famous sights (the parliament building, St. Stephen’s Basilica, Vigadó Concert Hall and Kossuth Lajos Square), as well as the Erzsébetváros district, with its many bars, restaurants and night clubs.
Being among the best cities for short-term leases, Prague can boast the lowest income tax (15%) and the highest profitability after Budapest (7%). More than six million tourists visited the Czech capital in 2015. The development of the recreational industry in Prague started comparatively recently, which is why this market has great potential for growth.
The most popular districts for purchasing an apartment to lease are Vinohrady, Vyšehrad, Holešovice, Hradčany, Žižkov, Josefov, Malá Strana and Old Town (Staré Město). Equally popular are streets in such districts as Vršovice, Nusle and Smíchov, which are closest to the centre.
Lisbon offers the most favourable conditions for short-term leases. In particular, the authorities permit the lease of housing for any amount of nights, whereas in London or Amsterdam, for instance, an apartment or a house can be rented out starting from 90 and 60 nights, respectively. During the past six years, the amount of tourists has increased most of all in the Portuguese capital (+10.5%).
Among the best districts of Lisbon are Alfama, with its steep, small, picturesque streets, restaurants and multiple sights (Lisbon Cathedral, Santo António Church, etc.); Baixa, with plenty of cafes and souvenir shops; Chiado, abundant in shops and museums; and Bairro Alto, attracting aficionados of music and nightlife.
Tranio.com has carried out this analysis based on mean measurements, according to which – based on the proportions of risk and profitability – the best cities for short-term lease are Budapest, Prague and Lisbon. It does not mean that leasing residential property in other cities is not worthwhile. For example, in case of purchasing an apartment with a ready-to-use license in Barcelona or any other city with an average occupancy rate, but in a good district near places of interest, such investments should not be any less profitable.
*Daria Berezina and Yulia Kozhevnikova, Tranio.com