Rental Yield Guide: Comparing Returns Across European Cities
Rental yield is the most fundamental metric for property investors. It tells you how much annual income a property generates relative to its cost. But comparing yields across cities requires understanding the local factors that affect returns.
Understanding Yield Types
Gross Yield
The simplest calculation:
Gross yield = (Annual rent / Purchase price) × 100
Example: €800/month rent on a €200,000 property:
- Gross yield = (€9,600 / €200,000) × 100 = 4.8%
Net Yield
Accounts for expenses:
Net yield = (Annual rent - Annual expenses) / Total acquisition cost × 100
Expenses include: property tax, insurance, management fees, maintenance, vacancy provision.
Net yield is typically 1-2% lower than gross yield.
Cash-on-Cash Return
Measures return on your actual cash invested:
Cash-on-cash = Annual cash flow / Total cash invested × 100
With leverage (mortgage), cash-on-cash can be much higher than yield — or negative if costs exceed income.
European City Comparison
Highest Gross Yields
| City | Avg. gross yield | Avg. price/m² | Typical rent/m² |
|---|---|---|---|
| Marseille | 6.0-7.5% | €2,500-3,500 | €13-18 |
| Porto | 5.5-7.0% | €2,800-3,500 | €12-16 |
| Valencia | 5.5-6.5% | €2,200-3,000 | €10-14 |
| Leipzig | 5.0-6.0% | €2,500-3,500 | €10-14 |
| Lisbon (emerging areas) | 5.0-6.0% | €3,000-4,000 | €13-17 |
Medium Yields
| City | Avg. gross yield | Avg. price/m² | Typical rent/m² |
|---|---|---|---|
| Berlin | 3.5-5.0% | €4,000-6,000 | €12-18 |
| Madrid | 4.0-5.0% | €3,500-5,000 | €12-16 |
| Milan | 3.5-5.0% | €4,000-6,000 | €14-20 |
| Barcelona | 3.5-4.5% | €4,000-6,000 | €13-17 |
| Lyon | 3.5-4.5% | €4,000-5,500 | €12-16 |
Lower Yields (Capital Appreciation Markets)
| City | Avg. gross yield | Avg. price/m² | Typical rent/m² |
|---|---|---|---|
| Paris | 2.5-3.5% | €8,000-12,000 | €22-30 |
| London | 2.5-3.5% | £6,000-12,000 | £18-30 |
| Munich | 2.5-3.5% | €7,000-10,000 | €18-24 |
| Amsterdam | 3.0-4.0% | €5,000-8,000 | €16-22 |
Factors Affecting Yield
Rental Strategy
- Colocation (shared rental): +30-50% revenue vs. single tenant
- Furnished rental: +15-25% vs. unfurnished
- Short-term rental: Potentially highest returns but regulatory risk and higher management costs
Property Type
- Small apartments (studios, 1-bed): Highest yield per m² but highest turnover
- Family apartments (3-4 rooms): Lower yield but more stable tenancy
- Buildings (entire small building): Best yields but significant management
Tax Impact by Country
Tax treatment dramatically affects net returns:
- France (LMNP): Favorable regime for furnished rentals — depreciation reduces taxable income
- Spain: 60% reduction on rental income for long-term residential leases
- Germany: Depreciation of 2-3% of building value annually
- Portugal: Reduced rates for longer lease terms (down to 5% for 20+ year contracts)
- UK: Mortgage interest relief phased out for individuals — consider corporate structure
How to Use Yield in Your Search
Incorporate yield calculations into your AI filtering:
Forward if gross yield > 5% based on:
- Annual rent estimated at [bedrooms × €X × 12]
- Purchase price from listing
Also show net yield calculation assuming:
- Acquisition costs: price × 1.08
- Annual expenses: 15% of gross rent + property tax (estimated €X)
Find high-yield investment properties automatically. Try FilterWise free — AI calculates yield for every listing in your search.