The European Residential Report is the latest report signed by BNP Paribas Real Estate, in a strategic partnership with Worx Real Estate Consultants, as its representative in Portugal, and provides information on the evolution of the residential sales and rental markets in Europe. The report states that the European residential markets showed great dynamism, but evolved at different speeds:
– Despite a year-on-year decline of 3.8% in the 3rd quarter of 2024, the first 9 months of the year saw a stabilization of mortgage lending. The trend will continue if the expansionary monetary policy continues in the coming quarters.
– House prices in Europe are expanding again (+2.9% year-on-year in the 2nd quarter of 2024). 21 of the 30 countries recorded new highs in house prices, with only 9 countries still below their peaks. Portugal stood out as the 7th market in which prices grew the most.
– Rental values recorded historic highs (+3.0% year-on-year in the 2nd quarter of 2024) as a result of the scarcity of purchasing power for housing and the growing frictions due to rent and energy regulations across Europe. Portugal also turned out to be the market with the 8th highest growth in housing rents.
– Given the evolution of both markets, at the moment in Portugal it pays to both buy and rent a house. The buy-to-rent ratio compares the monthly value of the bank loan
of the house versus the monthly rent of the equivalent property. This ratio showed that it largely pays to buy a house in Austria, Germany or Norway, but in Portugal, at the moment, it’s financially indifferent.
– Investment volumes increased by 2.3% year-on-year in the 3rd quarter of 2024, reaching €22.6 billion in the first 9 months of the year, maintaining an 18% share of the total commercial real estate investment volume. Most of the investment was predominantly domestic and from European investors and focused on deals of less than €50 million. Germany, the UK and Sweden were the main markets attracting capital.
The experts from BNP Paribas Real Estate and Worx Real Estate Consultants reflect on their expectations for 2025. In light of the fundamentals presented, they anticipate that housing prices across Europe will continue to rise, driven by the recovery in purchasing power due to central bank interest rate cuts, less expensive real estate markets and improved household disposable income. Similarly, they expect rent increases to continue next year, but at a slower pace.
Investment will correspond to the opportunities that exist in the market next year, since the lack of product is clear and the residential sector shows strong fundamentals of imbalance between supply and demand. On the other hand, the need for refinancing by some players and rental regulations in some countries may be factors limiting the channeling of capital into residential investment.
December 17th, 2024