Investors eyeing Southern Europe often weigh Spain against its sunny neighbors – Portugal, Italy, and Greece – to see where their property investment will yield the best return. All four offer Mediterranean charm, but when it comes to return on investment (ROI) in 2026, the numbers and trends reveal notable differences. Let’s dive into how these markets compare on rental yields, capital growth, and overall investment appeal.
Rental Yields: Spain Holds Steady, Italy Surges, Portugal and Greece Lag
Rental yield – the annual rent as a percentage of property price – is a key ROI metric. Spain’s rental yields are solid, hovering around mid-single digits. As of late 2025, the average gross rental yield in Spain was about 5.4%. This is a healthy figure, though slightly down from over 6% in 2024 as property prices climbed faster than rents. Spain’s yields often vary by region: coastal tourist areas and smaller cities can see higher percentages (6–7%), while big cities like Madrid or Barcelona have lower yields (3–5%) due to higher purchase prices. Surprisingly, Italy currently boasts some of the highest rental yields in Europe. Italy’s nationwide average gross yield stood around 7.2% in early 2026 – meaning Italian rentals, especially in certain cities, can offer robust income relative to price. This high yield is partly because many Italian markets (outside Milan or Rome) have relatively low property prices while rents remain reasonably strong. For example, a mid-sized apartment in Rome’s outskirts or smaller cities can generate attractive returns. In fact, a recent European study noted Italy has one of the top rental return rates on the continent. The caveat: Italian transaction costs and taxes (such as a 21% tax on rental income) need to be considered, as they can eat into net yield. Portugal and Greece, on the other hand, show more modest rental yields on average. Portugal’s average gross rental yield was about 4.3% at the end of 2025. Popular Portuguese cities like Lisbon and Porto have seen property values soar in recent years, which has compressed rental yields. While certain Portuguese markets (e.g. some suburbs or smaller cities) may still offer 6–7% returns, the nationwide figure is lower than Spain’s. Greece’s average yield is similar – roughly 4.4% in late 2025. In Athens, yields vary by neighborhood (small flats in cheaper districts can yield above 7%, but prime areas are closer to 4%). Greece’s property prices rose from a low base over the past decade, so rental returns have normalized. Winner on yields: Italy leads on pure rental yield potential in 2026, with Spain not far behind. Portugal and Greece trail with lower average yields. However, yield isn’t the whole story – we must also consider market growth and stability for total ROI.
Capital Growth and Market Trajectory
ROI isn’t just about yearly rent – property appreciation matters too. Here, Spain has been a standout in recent years. Spanish home prices have seen strong growth since 2020, accelerated by foreign demand and supply shortages. By mid-2025, Spain’s house price index was up 12.7% year-on-year, the fastest since 2007. Even after adjusting for inflation, prices nationally were still about 17% below the 2007 boom peak, suggesting some room to grow. Coastal regions and big cities have led the charge, whereas many interior regions saw milder growth. For investors, this means Spain offers not only steady rental income but also the prospect of capital appreciation, especially in high-demand areas. The flip side of rapid growth is the question of overheating (we address Spanish market “bubble” fears in another post), but broadly the outlook remains positive. Spain’s strong economy and booming tourism (a record 94 million visitors in 2024) continue to fuel housing demand. Portugal enjoyed a property boom in the mid-2010s through early 2020s, with prices in Lisbon and the Algarve rising sharply thanks to expat interest and the now-discontinued Golden Visa program. Annual price growth has cooled recently amid higher interest rates, but values remain near record highs. Portugal’s smaller market means big gains if you bought 5+ years ago, but looking ahead, growth may be more subdued compared to Spain. The end of the Golden Visa for housing in 2023 has tempered some speculative demand, and the government is tackling a housing affordability crisis. That said, Portugal still offers a stable environment, and certain cities (e.g. Braga, smaller inland towns) might have more growth potential as they catch up. Italy has been more of a slow burner. After a long period of stagnation following the 2008 crisis, Italian home prices have only recently started ticking up in select areas. Broadly, Italy’s market is less frothy – meaning you might not see double-digit annual gains, but also less risk of a sudden bust. The high rental yields in Italy often reflect that prices are comparatively low. There are opportunities in northern cities with strong industry (Milan saw decent appreciation) or in niche markets like Tuscany’s countryside (popular with foreign buyers). For ROI, an investor might view Italy as an income play (cash flow from rents) with moderate long-term price growth. Greece experienced a steep crash in the 2010s and a rebound in the late 2010s–2020s. Property values in Athens and on tourist islands have climbed impressively from their troughs – Athens apartments jumped in value as foreign investors and Airbnb operators bought in during the last decade. By 2025, Greek property prices are still considered reasonable by European standards, and international demand (including residency-by-investment buyers) supports growth. Greece’s appeal is “relatively low property prices, robust rental returns, and persistent demand”, as one investor guide puts it. However, economic and political stability are considerations; Greece’s economy is smaller and more volatile than Spain or Italy. The outlook for Greek real estate remains positive as the country’s finances improve, but future gains may be steadier rather than the sharp bounce-back we saw post-2015. Winner on growth: Spain has shown the strongest recent capital growth momentum, though one could argue it’s partly catching up from post-2008 lows. Greece had big gains off its lows but now moderating. Portugal’s boom has cooled, and Italy is gradually improving. For 2026 onward, Spain’s diversified and growing economy could continue to drive healthy property appreciation, giving it an edge in total ROI potential when combined with its solid rental yields.
Other Factors: Taxes, Stability, and Lifestyle ROI
Pure numbers aside, investors should weigh other factors that affect net returns and investment ease:
- Taxes and Costs: Spain and Portugal have relatively high transaction costs (around 10% purchase tax plus fees) and taxes on rental income (Spain charges non-resident landlords 19%–24% on rental income). Italy’s tax on rental income is ~21% flat in many cases, slightly reducing its high gross yields. Greece’s rental income tax is on a sliding scale (progressive rates up to 45% for high incomes), and both Greece and Portugal offer certain tax breaks for foreign residents (Portugal’s NHR regime, etc.). It’s important to calculate net yield after taxes. Spain, for EU citizens, allows deducting expenses before the 19% tax, whereas non-EU owners pay 24% on gross rent – a notable difference in net ROI. Also, consider annual property taxes and any residency or wealth taxes. Overall, none of these countries are low-tax havens for rental income, but the frameworks are manageable with good advice.
- Market Stability & Liquidity: Spain’s market is large and liquid, with high transaction volumes (over 640,000 home sales in 2024). That means easier entry and exit. Portugal’s market is smaller; prime areas can be competitive and less inventory. Italy’s market is quite regionally varied – selling a property in Milan is much easier than in a rural Sicilian town. Greece’s market is also location-dependent and can be slower outside Athens or tourist hotspots. Overall, Spain offers a good balance of liquidity and growth, partly why it attracts around 80,000 foreign homebuyers per year in recent times.
- Risk and Financing: All four countries are in the EU and relatively safe in terms of property rights. Spain and Portugal have solid legal systems and straightforward processes for foreigners buying. Italy is also foreign-buyer friendly but expect some bureaucracy. Greece has improved but still has quirks in property law and sometimes unclear title on older properties – due diligence is key. If you need financing, Spanish banks commonly lend to non-residents (typically 60-70% LTV), and Portuguese banks do as well. Italian banks can be more conservative to foreign buyers, and Greek mortgage markets are more limited. Investors buying with a mortgage will also note interest rates: as of 2025, eurozone rates have risen, so leverage costs apply equally across these markets.
- Lifestyle ROI: This is harder to quantify, but worth noting. Many investors are also looking to enjoy their property. Spain arguably offers the best all-round package: an ideal climate (in the south), vibrant cities, excellent infrastructure, and a mix of beach and urban lifestyle. It consistently ranks among the top expat destinations for quality of life – for instance, Spain was ranked the #1 country for expat quality of life in 2023 and 2024 and continues to top surveys for lifestyle appeal. Portugal also scores high for safety and lifestyle, with English widely spoken in expat hubs. Italy offers culture and cuisine that are second to none (who wouldn’t want a Tuscan farmhouse?), though bureaucracy might be a trade-off. Greece provides a more laid-back lifestyle by the Aegean – fantastic for holiday living, though public infrastructure (hospitals, roads on islands, etc.) isn’t as developed in all areas. Depending on whether you plan to use the property yourself, the personal “return” in enjoyment might tilt you toward one country or another. Many investors ultimately choose Spain for its combination of sunshine, modern amenities, and the ease of integrating into local life, which can be seen as an ROI in happiness.
Verdict: Which Market Wins in 2026?
There is no one-size-fits-all winner – each market has its strengths. Spain stands out as a balanced choice, with good yields, strong growth prospects, and a mature market that offers confidence. Italy may actually “win” on raw rental yield, so a cash-flow focused investor might find bargains there, but price growth is slower. Portugal provides stability and a famously attractive lifestyle for owners, though investment returns are a bit lower than Spain’s currently. Greece is the more speculative play – lower average yields now, but certain areas (tourism hotspots) can yield very well and future growth could surprise if the economy keeps improving. For many international investors in 2026, Spain hits the sweet spot of ROI and reliability. It has a diversified economy, enduring tourist demand, and a government supportive of foreign investment. The rental market is buoyant (rents hit record highs in 2024), and property values, while up, are underpinned by real end-user demand and limited new supply. In short, Spain offers a compelling “total package” return. Bottom line: If you’re shopping countries, crunch your numbers beyond the hype. Spain may not have the very highest yield on the continent, but its combination of steady income and capital growth – plus the intangibles of owning property in a vibrant, sunny locale – means its ROI often shines the brightest. And if you need personalized guidance in evaluating your options, we at Costa Dream Home are here to help. Our team has insight into both the Spanish market and the broader European context. Reach out to us to discuss your investment goals – whether you ultimately choose Spain or elsewhere, we’ll ensure you have the real data to make the best decision in 2026.
