Catella: rents to rise as demand for resi stays strong in Europe

Demand for housing in major European cities and urban centres remains high and is not being met by constrained construction supply, which is continuing to push up rents, according to the latest Catella Residential Market Overview for Q1 2024, which analyses trends in 63 cities in 20 European countries.

Thomas Beyerle, Head of Group Research, Catella

“Demand for the residential property segment is increasing again and prices for owner-occupied apartments have found their bottom,” said Thomas Beyerle, head of group research, Catella. “The low level of construction activity throughout Europe means that this trend is likely to continue.”

Following the downturn in recent quarters, prices of owner-occupied apartments are now stabilising. High inflation is putting pressure on net household incomes and, together with the price trend of recent years and increased financing costs, is making private buyers much more cautious.

In 34 of the 63 cities surveyed in the report prices have increased in Q1 compared to Q1 2023. The most expensive cities to buy an apartment are Geneva, in first place, with an average price of €15,650/sq m, and Zurich, second (€13,500). London is in third place €13,335). The cheapest city is Lahti, Finland, where the average price of an apartment is €1,560/sq m.

“There is still a significant shortage of new residential construction in major European cities and current building permit figures do not offer much hope of a substantial turnaround in the medium term,” said Lars Vandrej, senior research manager, Catella. “On the contrary, the housing shortage problem is likely to get worse in the short term and rents will continue to rise.”

In 51 of the 63 cities surveyed in the report, residential rents increased in Q1 this year, on average by 1.6% compared to the previous quarter. The steepest rises were recorded in two Irish cities: Cork saw rents increase by €3.60/sq m to €23 and Dublin by €3.10/sq m to €30.

London is at the top of the league table with an average rent of €36/sq m, followed by Geneva (€34) and Luxembourg (€30.75). The lowest rents in Europe can be found in Liège in Belgium (€10.40/sq m) and in Graz, in Austria (€10.70).

In Germany, rents have risen in all the top seven cities in Q1 this year. Munich and Frankfurt have the highest rents as well as the highest purchase prices, while Dusseldorf has the lowest.