The European real estate market has shown clear signs of recovery after a period of economic turbulence, inflationary pressure, and rising interest rates. According to ING, the rebound was the result of several factors acting simultaneously, including the stabilization of financial conditions, buyer adaptation, and renewed investor activity.
Stabilization of Interest Rates
One of the key prerequisites for the recovery was the cessation of aggressive interest rate hikes by the European Central Bank. After a prolonged period of increases, the benchmark rate stabilized at 4.00%, making mortgage financing more accessible. The average mortgage rate across the Eurozone stood between 4.5% and 4.8% per annum, encouraging buyers to reenter the housing market.
Price Adjustments in the Real Estate Market
Price declines led to an increase in demand across most European countries. Recent years saw:
- Germany experiencing an 8% price drop, especially in Berlin and Munich.
- France seeing a 6% decrease, with Paris being the most affected.
- Spain recording a 5% reduction, particularly in Madrid and Barcelona.
Average Property Prices Across Europe
| Country | Average Price per sqm | Change |
|---|---|---|
| Germany | €4,100/m² | -8% |
| France | €4,500/m² | -6% |
| Spain | €2,700/m² | -5% |
| Italy | €2,300/m² | -3% |
| Netherlands | €3,900/m² | -7% |
| Portugal | €2,800/m² | -4% |
These corrections made homeownership accessible once again and renewed real estate\’s appeal for investors.
Growth in Rental Demand
Alongside the recovery in property purchases, there has been a significant rise in rental demand. Key reasons include:
- An increase in mobile professionals.
- Intensified international migration.
- A shortage of affordable rental housing in major cities.
Rental Rate Dynamics
- In Berlin, the average rent for a 70 m² apartment reached €1,350 per month, up by 12%.
- In Paris, average rents rose to €1,800 per month, an increase of 9%.
- In Madrid, rents grew by 11%, with an average monthly cost of €1,250.
Rising rental rates have once again made residential real estate attractive for both private and institutional investors.
Increased Activity of Institutional Investors
The renewed interest from major funds has also played a crucial role in the market’s recovery. Institutional investors have been actively investing in:
- Residential property, especially Build-to-Rent projects.
- Logistics facilities.
- Premium office real estate.
Examples of Major Deals
- In Germany, Union Investment acquired a portfolio of office buildings for €420 million.
- In the Netherlands, APG invested €380 million in rental housing projects in Amsterdam.
- In Spain, Allianz Real Estate purchased a logistics center for €160 million.
Such investments highlight a renewed confidence in European real estate assets.
Geography of Recovery
Recovery rates varied across countries and regions. The leaders included:
- Portugal, due to favorable tax incentives and its popularity among digital nomads.
- Germany, driven by price stabilization and strong internal migration.
- Poland, benefiting from urban population growth and a dynamic rental sector.
Meanwhile, the UK experienced a slower recovery, hindered by high mortgage costs and continued uncertainty in the London market.
Outlook for Europe Real Estate Market
According to ING forecasts, the European real estate market is expected to continue strengthening. Anticipated trends include:
- An annual price growth rate between 3% and 5%.
- Continued high demand for rental housing.
- The development of projects focused on energy efficiency and ESG compliance.
- Limited new construction due to high building costs and land scarcity in major urban areas.
Key risks remain: potential inflationary pressures, political instability in some regions, and tighter banking regulations.
Conclusion
The European real estate market has demonstrated resilience and an ability to adapt to changing economic conditions. Price corrections, stabilized interest rates, and rising rental demand have laid the groundwork for renewed transaction activity and investment interest.
Private buyers have found new opportunities to purchase property at more favorable prices. For investors, the market has regained its attractiveness through higher rental yields and asset stability.
Successful investment strategies will depend on careful selection of locations with high growth potential and a focus on energy-efficient and ESG-oriented properties. European real estate once again affirms its position as a reliable investment class and a strong destination for long-term capital allocation.
