Property or a bank deposit: which is more profitable?

Many people in Poland, Germany, Czechia and the Baltics keep their savings on deposits and ask whether a flat would earn more. The honest answer is: sometimes, under conditions, and not automatically. Property is not a better deposit. It is a different asset with its own income, its own risks and its own costs. This article gives a framework for comparing the two on equal terms. The rest of the series goes into each part: deposit rates, inflation and real return, rental yield versus deposit interest after tax and costs, mortgage leverage and its risks and the non-financial benefits of owning property abroad.

The framework: total return, not just rent

A deposit pays one thing: interest. A property pays in several ways, and each has a cost side. For a fair comparison, count everything for both options, after tax, over the same period.

• Net rental yield. Rent collected, minus vacancy, management, maintenance, service charges, insurance, property tax and income tax.
• Capital growth. The change in the price of the property over the holding period. It can be positive, zero or negative.
• Avoided rent. If you live in the property, the rent you no longer pay is a return, and it is usually untaxed.
• Costs. Purchase taxes and fees on the way in, selling costs and any capital gains tax on the way out.
• Taxes along the way. On the deposit side, tax on interest. On the property side, tax on rent and sometimes an annual property tax.

Then take the deposit: interest after tax. Finally, put both against inflation. A return that does not beat inflation after tax is a loss of purchasing power, even if the balance grows. We explain this in the article on real return.

A hypothetical 10-year comparison

This is an illustration with round numbers, not a forecast and not market data. The assumptions are chosen to be simple.

A saver puts EUR 212,000 to work for ten years. In option A it goes on deposit. In option B it buys a EUR 200,000 flat, with EUR 12,000 (6%) going on purchase taxes and fees.

Deposit. Assume 3% gross interest and 19% tax on the interest, so 2.43% net a year, compounded. After ten years EUR 212,000 grows to about EUR 270,000. Assume inflation of 2.5% a year: prices rise about 28% in ten years, so EUR 270,000 buys what about EUR 211,000 buys today. The balance grew, the purchasing power did not.

Property. Assume the flat nets EUR 5,000 a year after all running costs and tax, which is 2.5% of the price. Over ten years that is EUR 50,000, not reinvested. Assume the price rises 2% a year, to about EUR 243,800, and that selling costs take 3% (about EUR 7,300) and tax on the gain takes EUR 5,000. Proceeds are about EUR 231,500. Add the EUR 50,000 of rent and the total is about EUR 281,500. In today's money that is about EUR 220,000.

In this example the property finishes about EUR 11,000 ahead in nominal terms. Now change one assumption: prices do not grow at all. Proceeds fall to about EUR 194,000 after selling costs, the total is about EUR 244,000, and the deposit wins by roughly EUR 26,000. The result depends almost entirely on capital growth, which nobody can promise. That is the central point of the whole series.

When property can win

• You hold it for a long time, ten years or more, so that purchase costs are spread thin.
• You buy at a fair price in a market with real rental demand and stable tenants.
• You live in it, or will, so that avoided rent counts.
• You expect prices and rents to follow inflation, which protects a real asset better than a nominal claim. This is a tendency, not a rule.
• Deposit rates after tax are below inflation, as they have often been in recent years.
• You use the property in a way a deposit cannot be used: a home, a place for the family, a base in another country.

When a deposit is the better choice

• Your horizon is short, under about five years. Purchase and sale costs can eat the whole gain.
• You may need the money soon. A deposit is liquid; a property can take months to sell and may sell at a discount.
• Purchase costs are high, as in some countries, or you would overpay.
• The rental market is weak, vacancy is high or the rules are restrictive.
• The property is in another currency than your life and income, or in a country with regulatory or political risk.
• The mortgage would cost more than the property earns.
• The amount would make one property most of your wealth. A deposit up to EUR 100,000 per person per bank is covered by a deposit guarantee scheme in EU states (in Poland, BFG). A property has no such protection.

What money cannot show

A property also gives things a deposit does not: personal use, a place for the family, a possible residence route outside the EU, a claim you can pass on and diversification away from one bank and one currency. It also takes things away: time, management, stress, illiquidity and concentration in one object. We cover these in the non-financial benefits of owning property abroad. Put a price on them honestly before deciding.

How to run your own comparison

• Write down your horizon and the date you may need the money.
• Get the real deposit rate you can obtain, after tax.
• Build the full cost list for the property with our total cost of ownership article and the calculators.
• Test three price scenarios: down, flat, up.
• Repeat with a mortgage only after reading the leverage article.

FAQ

Is property always more profitable than a deposit? No. In our example it wins only when prices grow. With flat prices the deposit wins. Outcomes depend on price, costs, taxes, horizon and the market.

How long should I hold a property to beat a deposit? There is no fixed number. Purchase and sale costs are paid once, so a longer horizon spreads them. Under about five years it is hard for property to cover them.

Is a deposit really risk free? It is protected up to EUR 100,000 per person per bank by deposit guarantee, but inflation and tax can still reduce its real value. Above that limit, the bank's own solvency matters.

Can I do both? Many people do. Keeping a liquid reserve on deposit and putting only money you will not need into property is a common approach. We do not give personal advice on the split.

Does the answer change if I buy abroad? Yes. Currency, local taxes, management at a distance and legal rules are added. The country yield and price guides on this site cover them.

How we help

We are a trilingual platform that finds properties and coordinates independent local lawyers and tax advisers. This text is informational and is not legal, tax or investment advice, and past performance does not guarantee future results. All figures in the example are hypothetical. Check current rules and rates with the bank, the tax office and an independent adviser before deciding.