In the run-up to 2025, prices are stabilizing in Europe’s residential property while rents continue their upward trajectory across major cities. According to the latest Catella Residential Market Overview, this renaissance comes despite persistent economic uncertainties, primarily driven by declining financing costs and reduced construction activity.
The study, examining 58 cities across 16 European countries, reveals a stark contrast in urban housing dynamics. London maintains its position as Europe’s most expensive rental market, with average monthly rents reaching €37.60 per square meter. The Swiss cities of Geneva and Zurich dominate the ownership market, with Geneva topping the charts at €15,770 per square meter.
Perhaps most concerning is the dramatic decline in building permits across Europe, with the EU averaging a 23% decrease over the past two years. Nordic countries have been particularly hard hit, with Finland and Sweden seeing drops of 52% and 48% respectively. Germany, Europe’s largest economy, has experienced a troubling 37% decline, further exacerbating its housing shortage.
“We’re seeing a dual trend of rapidly rising rents alongside strengthening capital values,” explains Dr. Lars Vandrei, Senior Research Manager at Catella Residential Investment Management. “This is leading to a stabilization in yields, which should ultimately help stimulate construction activity.”
The German market offers a microcosm of these trends, with Munich leading both rental and purchase prices among the country’s top seven cities. At €24.10 per square meter for rentals and €9,950 per square meter for purchases, Munich exemplifies the premium urban markets now command.
Spain has bucked the trend with a 27% increase in new housing permits, while Portugal maintains stable growth. Supply, in other words, can keep pace with demand, even in challenging economic times. However, whether or not supply can catch up with persistent demand in Europe’s major urban centers remains an open question.
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