T1 vs. T2 in Lisbon: which apartment type has the best rental yield in 2026?

Most investors assume the T1 has the higher yield because it costs less to buy. That's a reasonable starting point — but an incomplete one. In Lisbon in 2026, a T2 actually costs less per square metre than a T1. That single fact reshapes the comparison considerably, and the decision between the two types becomes less obvious than it first appears.

This article compares both apartment types with real 2026 data: average rents, purchase prices, calculated gross yield and market velocity — by source and by district.

The 2026 baseline data

The base data for this comparison comes from DECO PROteste (January 2026) and Idealista's quarterly rental yield report (Q1 2026):

The price-per-m² paradox

The most counterintuitive finding in this comparison: in Lisbon, a T2 costs less per square metre than a T1 — €5,572/m² against €6,157/m², a 9.5% difference in unit price. This happens because T1s are concentrated in more central, premium locations where demand for compact apartments is particularly intense.

In practical terms, a buyer of a T2 is paying less for each square metre of property asset — which benefits the yield calculation when the T2's rent per square metre is competitive. A T2 isn't simply "more expensive because it's bigger." In many cases it's actually a more efficient income asset in moderately-priced districts.

Gross yield compared: the real calculation

Using 2026 data, we calculate the gross yield for two representative examples — using the contracted rent for the T2, as it's closest to actual rental income:

The T1 wins on gross yield — but the structural reason matters: the 50m² T1 costs €137,910 less than the 80m² T2. With that additional capital an investor could either reinvest in a second smaller property or maintain a liquidity buffer to cover vacancy periods.

Net yield — what actually reaches the investor

Gross yield ignores the costs that reduce real income. To arrive at net yield, deduct:

• IMI property tax: based on the Taxable Patrimonial Value (VPT), typically 0.3%–0.45% in Lisbon for urban properties
• Service charges (condomínio): €50–€200/month depending on the building
• Estimated vacancy: a 5–8% annual rent buffer is conservative for Lisbon
• Maintenance and minor repairs: 1%–2% of property value per year
• IRS on rental income: 10% flat rate for contracts of ≥3 years with rents ≤€2,300/month (OE 2026)

After these deductions, the net yield on a T1 in Lisbon typically sits between 3.5% and 4.5%, and for a T2 between 2.8% and 3.8% — reflecting how rising purchase prices have compressed Lisbon rental profitability (MaxCidadela, 2026).

Market speed and demand

A yield calculation assumes the property is tenanted. How quickly each type finds a tenant is therefore a critical variable.

Which type exits the market fastest

In December 2025, Idealista analysed transaction speed by type across Portugal: 41% of T1 listings transacted in under one month, against 36% of T2s and 35% of T3s (Idealista, December 2025). The T1 is consistently the most liquid apartment type.

Rental demand by type

In 2026, T2 apartments represent 19.5% of total rental demand in Portugal — the most sought-after type in absolute terms. But T1 demand has the fastest growth rate at +319.8% year-on-year, driven by students and young professionals unable to afford a T2. Rental supply in Lisbon fell 13% in Q1 2026 year-on-year, with 13% of listings being let in under 24 hours (Idealista, May 2026).

How the district changes the outcome

The yield comparison shifts substantially by district. Yield compression in Lisbon is concentrated in premium areas; in emerging zones, the arithmetic can reverse entirely.

Data: DECO PROteste / Executive Digest, 2026.

The Santa Clara case illustrates an important principle: a T2 bought at €3,895/m² — well below Lisbon's T2 average of €5,572/m² — with a competitive rent can generate a higher yield than any T1 in Príncipe Real or Misericórdia, where purchase prices are three times as high.

Which to choose: a decision framework

There's no universal answer. The choice between T1 and T2 should be guided by investment profile and the specific district's conditions:

The T1 favours investors seeking to maximise yield percentage with limited capital, in high-demand areas like Marvila, Beato or Areeiro. The T2 favours investors prioritising stability and absolute cash flow — family tenants typically renew contracts more frequently and generate lower wear-and-tear, which reduces maintenance and re-letting costs over the medium term.

In an emerging district with low purchase prices — such as Santa Clara at €3,895/m² — a T2 can outperform any premium-zone T1 on yield. District-level yield data for Lisbon should be the starting point before deciding on apartment type.

Frequently asked questions

T1 or T2: which has the better yield in Lisbon?

In 2026, a T1 tends to generate a slightly higher gross yield — approximately 6.0% vs. 4.3% in a representative example. The gap comes from the T1's higher rent per square metre, even though the T2 costs less per square metre to buy. But the district is decisive: in emerging areas with low prices, the T2 can reverse the result.

Which type has the highest rental demand?

T2 apartments represent 19.5% of total rental demand in Portugal — the most sought-after type in absolute terms. But T1 demand has the fastest growth rate, making it a highly liquid asset in Lisbon where rental supply fell 13% at the start of 2026.

Can a T2 have a higher yield than a T1?

Yes. In districts with purchase prices below the Lisbon average, like Santa Clara (T2 at €3,895/m²), the yield can exceed that of a T1 in Príncipe Real or Misericórdia, where buy-side prices make yield investing unviable.

Is the rental income tax rate different for T1 and T2?

No. Portugal's 2026 budget sets a flat 10% IRS rate for rents up to €2,300/month on contracts of at least 3 years' duration. Typical T1 and T2 rents in Lisbon fall comfortably within that threshold.