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Pourquoi investir en Europe de l’Est

19 June 2017 Comments (0) Other, Real Estate

Why invest in Eastern Europe

Investing in property abroad can be profitable. But the best deals are being done in the East, where stone is still affordable and rental return higher.

In Budapest, Prague, Riga and Warsaw, real-estate prices remain reasonable. Renting is profitable and little taxed and Belgian nationals, thanks to the European Union, are not subject to any restriction as to the number of acquisitions. They also benefit for greater legal certainty in transactions, the process being similar to ours.

Budapest is a popular resort destination. There is abundant supply for all floor areas (from 40 to over 300 square metres). It is concentrated above all in Pest, on the left bank of the Danube. In the city, the average prices are around 1,500 Euro per square metre, with peaks of 4,000 Euros for the most fashionable addresses. Profitability is high. It often exceeds 10% for average floor areas (from 60 to 90 square metres) rented for between 60 and 180 Euros per night. And the tax doesn’t make much of a dent in it. You won’t have to pay local tax or wealth tax, they don’t exist in Hungary. Your rental income will, after deducting all your charges, be taxed at a flat rate of 15%.

In Prague, a living museum, average prices oscillate between 2,000 and 5,000 Euros per square metre for quality, restored properties in perfect condition. They are higher in the centre, with its high tourist presence, and can climb to 9000 Euros on the most expensive streets. As an owner you will have to pay an annual local tax of a ridiculous amount (for a 100-metre square apartment it won’t be more than 100 Euros). You won’t have to pay any wealth tax. Your real-estate income, net of charges, will be taxed at a flat rate of 15%. This is the same rate applied to real-estate capital gains. However, if you sell after holding for five years, you will be exempt.

Modest taxes

In Riga, prices for a good flat in perfect condition start at 2,000 and rise to 4,500 Euros per square metre for upmarket apartments. There is little property for renovation and their prices vary between 800 and 1,600 Euros per square metre. Once you are an owner, you will have to pay an annual tax of 0.2%, or 0.6 % at the most, of the cadastral value of your property, which is far lower than its real value. There is no wealth tax.

In Warsaw, the properties available are practically all sold in perfect condition for prices per square metre that range between 2,700 and 5,000 Euros. The tax conditions are highly favourable: rent is taxed at 8.5%. Capital gains, taxed at 19%, are exempted after five years’ holding and local tax is modest, as it cannot exceed 0.56 zloty per square metre, i.e. approximately 13 Euro cents. Last piece of good news: there is no wealth tax.

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