Catella: European housing prices rebound as rents continue to climb

Housing markets across Europe are witnessing a notable recovery, with rental prices surging and property values stabilizing after a period of decline. The latest Catella Residential Market Overview Q3/2024, which analyzed 58 cities across 16 European countries, highlights key trends shaping the residential market. Despite economic uncertainties, declining construction activity and lower financing costs are fueling demand and pushing prices upward.

Dr. Lars Vandrei, Senior Research Manager at Catella Residential Investment Management, remarked:
“Rental markets remain robust, with strong growth in capital values contributing to yield stabilization. We anticipate increased activity in transaction markets, which could stimulate much-needed construction activity.”

Key Findings: Rental Market Trends

• Rents Increased in 53 of 58 Cities: Average monthly rent reached €19.70/m², a 4.1% rise compared to Q1 2024.
• London Tops the List: With an average rent of €37.60/m² (+€1.60), London remains the most expensive city, followed by Dublin (€35.00/m²) and Geneva (€34.70/m²).
• Lowest Rents in Liège and Graz: Both cities reported rents of just €11.00/m².
• Ireland Leads Growth: Dublin rents increased by €5.00/m², and Cork saw a €4.00/m² rise to €27.00/m². The only decline was in Montpellier, France.

Ownership Market: Stabilizing Prices

• Prices Up in 45 Cities: Condominium prices averaged €5,666/m², a 2.1% increase compared to Q1 2024.
• Geneva and Zurich Remain Priciest: Geneva leads at €15,770/m² (+€120), followed by Zurich (€14,000/m²) and London (€13,930/m²).
• Finland Offers Affordability: Lahti (€1,640/m²) and Jyväskylä (€2,380/m²) recorded the lowest prices.
• Polish Cities Surge: Warsaw (+13%), Wroclaw (+16%), and Krakow (+21%) reported the highest relative increases since Q1.

Yields: Rising but Stable

• Prime Yields Average 4.59%: This marks a slight increase from 4.48% in Q1 2024.
• Lowest Yields in Zurich and Stockholm: Both cities posted yields of 2.50%, with Geneva at 2.70%.
• Highest Yields in Krakow and Cork: Both cities reported yields of 6.25%, drawing investor interest.

German Markets: Munich Dominates

• Rent Growth Across All Cities: Munich leads with €24.10/m² (+€1.70), followed by Frankfurt (€19.20/m², +€1.00) and Stuttgart (€18.10/m², +€1.40).
• Munich Tops Purchase Prices: At €9,950/m², Munich remains Germany’s most expensive market, with Frankfurt (€7,070/m²) and Hamburg (€6,800/m²) following.
• Düsseldorf Offers Best Yields: Yields in Düsseldorf reached 5.0%, while Munich recorded the lowest at 4.2%.


Special Report: Europe’s Declining Building Permits Worsen Housing Shortages

An alarming trend in declining building permits exacerbates Europe’s housing crisis:
• Permits Down 23% Across Europe: Finland (-52%), Sweden (-48%), and Germany (-37%) were hardest hit.
• Portugal and Spain Buck the Trend: Portugal saw a stable 4% increase, while Spain reported a significant 27% rise in new permits.

This decline in new housing supply is driving rental prices higher and intensifying the housing shortage. With construction activity at historically low levels in many markets, demand continues to outpace supply.

Outlook: Stabilization and Recovery

The European residential market is entering a phase of stabilization, marked by rising rents, recovering property values, and increasing transaction activity. While challenges such as housing shortages persist, cities like Dublin, Krakow, and Zurich remain key areas to watch as they balance demand with opportunities for growth.