Investment volume
The European residential investment volume reached €18.3bn in H1 2025, stable compared to H1 2024. Despite the decrease of large-scale deals in Q2 2025, smaller-scale deals continue to drive residential market activity keeping the sector’s share of volume at 20% of total real estate investment.
Residential prices
Residential prices across European cities expanded on aggregate by +5.5% in Q1 2025 vs Q1 2024.
In most European cities, mortgage rates have fallen because of monetary easing: Euro area mortgage rate stands at 3.30% in Q2 2025. However, household’s housing purchasing power (HPP) is expected to remain weak across cities. An improvement is not necessarily expected due to rising property prices. The pathway for HPP will depend on whether lower interest rates or higher prices dominate market activity.
Rents
European rents hit new recors hights.
Demand in the letting market continues to rise despite high rental values. The factors supporting this dynamic include lower purchase affordability, greater profitability of short-term tourism rental and supply shortages. The latter is created by a lack of new housing construction and magnified in some cities by rent regulations.
Market fundamentals
682,364 housing permits were recorded in Europe in H1 2025, a 19% y/y decrease. This decline is partly explained by a loss of confidence from developers. The legacy of high inflation interest rates with reduced purchasing power continues to create demand uncertainty. The complexity of obtaining building permits from the municipality and weaker economic sentiment are factors aggravating the lack of new construction.
