Europe’s property market is entering a decisive new stage as 2025 comes to an end. After years of turbulence marked by inflation spikes, higher borrowing costs, and subdued transaction volumes, conditions are stabilising. The European Central Bank cut its deposit rate four times in 2025 — in January, March, April, and June — bringing it down to 2.00%. Inflation is edging closer to the 2% target, and EU house prices rose by 5.7% year-on-year in Q1 2025, the first significant upturn since 2021.
The rebound, however, is selective. Southern and Central Europe are leading the momentum, with Portugal, Romania, and Bulgaria posting double-digit growth, while Greece and Spain remain resilient. Poland and the Baltics continue to offer attractive yields. At the same time, regulation is reshaping strategies: Lisbon has frozen new short-term rental licenses, Athens has suspended registrations in its historic core until at least 2026, Barcelona is phasing out tourist flats by 2028, and Spain has launched a new rent indexation system in 2025.
Against this backdrop, seven cities stand out for their investment potential. Each combines specific advantages in yield, growth, or stability.
Comparative Table
| Rank | City | Avg price €/m² (2025) | Avg rent €/m²/month | Gross yield % | YoY price change % (2025) | Policy & Tax Highlights |
|---|---|---|---|---|---|---|
| 1 | Lisbon, Portugal | City ~€6,400; commuter belt €2,800–3,500 | ~€22 | ~5% | +16.3% (Q1 2025) | Freeze on AL licences, golden visa exclusion, rental tax 25–28% |
| 2 | Athens, Greece | ~€2,300–2,700 (centre); >€4,000 (coastal) | €10–13 | ~5% | +5–7% (H1 2025) | STR freeze in historic core, energy upgrade incentives |
| 3 | Bucharest, Romania | €1,850–2,100 | ~€9/m² | 6–7% | +15% | Flat 10% rental tax, high liquidity |
| 4 | Sofia, Bulgaria | €1,900–2,200 | €11–13/m² | 4.2–4.6% | +14–16% | Flat 10% rental tax, euro adoption path 2026 |
| 5 | Warsaw, Poland | ~€4,100 (≈ PLN 18–19k/m²) | €16–18/m² | 6–7% | ~6% | Expanding PRS sector, strong rental demand |
| 6 | Riga, Latvia | Standard €850–900; premium €2,200–2,600 | €8–10 | 7–8% | +5.8% | Yield leader, stable policy, renovation potential |
| 7 | Girona, Spain | €2,400–2,550 | €12–13 | 5.5–6% | +2–8% | Rent indexation, stress zones, spillover from Barcelona |
Lisbon, Portugal — Europe’s Growth Magnet
Lisbon has emerged as Europe’s strongest growth story. Prices in the city average around €6,400/m², while outer commuter belts like Setúbal and Barreiro still offer homes between €2,800–3,500/m². Prime districts such as Chiado and Príncipe Real now command €8,000/m² or more.
Rents have surged to around €22/m²/month, with one-bedroom apartments leasing at €1,100–1,300/month and two-bedrooms closer to €1,600–1,800. Yields remain steady at around 5%, but investor appetite is more focused on appreciation. Demand is fuelled by expatriates, tech professionals, and Lisbon’s expanding digital economy.
Portugal recorded the EU’s highest property price growth in Q1 2025, with a 16.3% year-on-year increase. Limited supply, high building costs, and tight zoning keep the market undersupplied.
Yet the policy framework remains restrictive. Property has been excluded from the golden visa since 2023, and new AL licenses are frozen in central districts. Municipal authorities continue to extend moratoriums on short-term rentals. For investors, this is steering focus toward commuter areas and long-term rentals.
Lisbon is not the highest-yielding city in Europe, but its combination of strong capital growth, resilient demand, and international appeal ensures it remains a magnet for investment heading into 2026.
Athens, Greece — Tourism and Diaspora Fuel Growth
Athens is experiencing a renaissance. Apartments in central neighbourhoods average €2,300–2,700/m², while coastal areas like Glyfada or Vouliagmeni push beyond €4,000/m². The luxury segment tied to the Ellinikon mega-project is even higher, attracting diaspora buyers and foreign capital.
Rental demand is robust. Average rents range from €10–13/m²/month, with well-located one-bedroom units letting for €700–900/month and family apartments above €1,200. Yields hover around 5%.
Prices rose by around 5–7% year-on-year in the first half of 2025, reflecting a steady but sustainable trajectory. The market is underpinned by tourism flows, a strong return of the Greek diaspora, and ongoing infrastructure upgrades.
Regulation is tightening: from early 2025, new short-term rental licenses in the historic centre were suspended, and the freeze has been extended through at least 2026. At the same time, Greece offers incentives for energy retrofits, aligning with EU climate policies.
Athens combines stability with growth. While regulation may curb speculative plays, it strengthens the long-term rental sector, making Athens one of the most balanced growth opportunities in Southern Europe.
Bucharest, Romania — Europe’s Yield Powerhouse
Bucharest offers some of the highest yields in the EU. Sale prices for standard apartments range €1,850–2,100/m², while two-bedroom rentals average €650–700/month. Gross yields of 6–7% make the city one of Europe’s strongest cash-flow markets.
Prices climbed about 15% year-on-year in 2025, driven by affordability and rapid urban demand. Selling times in popular districts such as Sector 2, 3, and 6 have shortened to less than 50 days, underscoring liquidity.
The tax regime is straightforward, with a flat 10% rental tax. This simplicity, combined with Romania’s relatively low entry costs, has kept the market investor-friendly.
Bucharest’s risks include affordability pressure as wages lag behind price growth, and the potential for overheating if double-digit increases persist. Yet the city’s fundamentals—large population, active rental demand, and investor-friendly policy—ensure its role as Europe’s yield leader.
Sofia, Bulgaria — Affordable Growth with Light Tax
Sofia has continued its upward trajectory in 2025. Prices average €1,900–2,200/m², with prime central stock and new builds trading above €2,500/m². Rental markets remain active, with two-bedroom apartments letting for €700–1,200/month, translating into yields of 4.2–4.6%.
Annual growth of 14–16% has been recorded, driven by affordability, domestic demand, and international interest. Demand is strongest in metro-connected districts such as Lozenets, Mladost, and Studentski Grad, which benefit from both professional and student tenants.
The flat 10% rental tax remains an advantage, while Bulgaria’s path to euro adoption in 2026 adds longer-term stability.
Sofia does not offer the high yields of Bucharest or Riga, but its combination of affordability, capital growth, and macroeconomic stability keeps it attractive for investors seeking balance.
Warsaw, Poland — Liquidity and Stability
Warsaw is Central Europe’s anchor market. Prices average about €4,100/m², equivalent to PLN 18–19k. One-bedroom apartments rent for €800–1,100/month, translating into yields of 6–7%.
The city has seen price stability in 2025, with a year-on-year increase of around 6%. Demand remains high, driven by strong urbanisation, a rising middle class, and institutional investment. The PRS sector is expanding rapidly, with developers and funds creating large-scale rental portfolios.
Vacancy rates remain very low, and supply constraints keep rents on an upward trajectory. Warsaw is less about high growth and more about scale and liquidity. It offers a transparent market, deep demand, and a robust long-term outlook.
Riga, Latvia — Yield Champion of the Baltics
Riga stands out as a yield market. Standard apartments in Soviet-era blocks cost €850–900/m², while premium central stock reaches €2,200–2,600/m². Rents of €600–900/month deliver gross yields of 7–8%, some of the highest in the EU.
Prices grew 5.8% year-on-year in Q1 2025. While growth is modest compared to Southern Europe, income stability makes Riga appealing to investors focused on cash flow.
The city’s stock offers significant renovation potential. Central districts with older buildings provide value-add opportunities, with refurbished units achieving both higher rents and better exit values.
Riga’s demographic pressures and limited international recognition are risks, but its yields and affordability ensure it remains a standout income market in Europe.
Girona, Spain — Catalonia’s Alternative Market
Girona, located just 100 km north of Barcelona, is benefiting from regulatory spillover. With Barcelona phasing out tourist flats by 2028, demand is flowing into secondary cities.
Average prices in Girona range €2,400–2,550/m², with apartments in the historic centre and houses in nearby towns achieving higher premiums. Engel & Völkers report growth of +4.5% for apartments and +8.4% for houses, while official trackers put growth closer to +2%.
Rental values average €12–13/m²/month, making yields around 5.5–6%. Demand is driven by lifestyle buyers, professionals seeking affordability compared with Barcelona, and tourism-related rentals.
Spain’s new rent indexation system and stress-zone designations apply to Girona as well, shaping strategies around long-term tenancies. The city combines lifestyle appeal, affordability, and regulatory tailwinds, ensuring its position as Catalonia’s alternative market.
Expert Perspectives
Analysts from major firms describe 2025 as a “vintage year” for selective investment. While overall liquidity remains thin, capital is flowing into residential, student housing, and PRS. Energy-efficient buildings continue to command rental premiums, and investors are increasingly prioritising assets that comply with upcoming EU sustainability standards.
The outlook remains city-specific rather than continental. Success in 2025 and beyond depends on navigating regulation, targeting undersupplied segments, and aligning with demographic and lifestyle demand.
Final Takeaways
- Yield markets: Bucharest and Riga
- Growth plays: Lisbon, Athens, Sofia
- Stability anchor: Warsaw
- Lifestyle alternative: Girona
Europe at the end of 2025 is not experiencing a broad boom but a patchwork of opportunities. Investors who adapt to local dynamics, focus on regulation-proof assets, and anticipate shifts in demand will be best positioned for selective success.
