The European real estate market recovered broadly in 2025. According to the Eurostat House Price Index, euro area house prices rose 5.1% year-on-year in the fourth quarter of 2025. For the EU as a whole, the increase was 5.5%. Q4 2025 thus confirms a trend visible from 2024, after a brief stabilisation between summer 2022 and end-2023.
Leaders and laggards
Eurostat published increases for 25 of the 26 member states for which data are available. The largest annual increases were in:
- Hungary: +21.2%
- Portugal: +18.9%
- Croatia: +16.1%
At the other end stood Finland with a decline of 3.1% — the only member state with an annual price drop. The Dutch market saw an average increase in line with the EU average, with regional outliers in and around the Randstad.
Long term: 57.9% since 2010
Between Q1 2010 and Q1 2025, European house prices rose 57.9% according to Eurostat, while rents rose 27.8% in the same period. This gap shows that house prices grow faster than rents — a pattern that puts pressure on affordability for younger buyers and structurally changes the price-to-rental-income ratio.
Drivers behind price increases
The Eurostat — Housing in Europe 2025 edition analyses four main drivers:
- Limited supply. New construction lags population growth in urban areas, especially in Southern Europe.
- Lower financing costs. ECB rate steps in the first half of 2025 set the mortgage market in motion again.
- International capital. Foreign purchase flows reinforce demand in top locations — especially Portugal, Spain and Greece.
- Tourism and short-term rentals. In Southern European coastal cities, tourism demand pushes prices up.
ECB rate: pause since summer 2025
The European Central Bank cut its three policy rates four times in the first half of 2025, totalling 100 basis points, and has paused since June. On 18 December 2025, the Governing Council held rates unchanged unanimously:
- Deposit facility rate: 2.00%
- Main refinancing rate: 2.15%
- Marginal lending rate: 2.40%
The ECB expects inflation to stabilise at the 2% target over the medium term. Growth is forecast at 1.4% in 2025, 1.2% in 2026 and 1.4% in 2027.
Mortgage market and affordability
Lower rates translated in 2025 into renewed growth in mortgage lending. In Spain, Portugal and Italy, new mortgages rose by double digits compared with 2024 according to national statistics offices. In Germany — earlier hit by the rate shock — the market is recovering cautiously.
At the same time, affordability remains under pressure in most European cities. The European Housing Affordability Index shows that in 2025 younger households in virtually every capital spend more than 30% of their gross income on housing — above the threshold flagged as concerning in EU reports.
Commercial real estate
The European commercial real estate market (institutional volume) according to MSCI Real Assets showed a recovery in transaction volumes in 2025 after the 2023 dip. Logistics and residential delivered the highest yields; offices remained constrained by structurally lower occupancy.
Outlook: what the market signals for 2026
Based on Eurostat data, ECB projections and market reports from CaixaBank Research, PwC and JLL, three patterns are likely in 2026:
- Continued price increases at a more moderate pace. The rate environment remains accommodative, but growth rates won't match all 2025 peaks.
- Increasing regional divergence. Southern Europe is expected to grow faster than Northern Europe.
- Growing importance of sustainability. The EU EPBD directive is driving renovations; low-energy-performance property is becoming non-rentable in an increasing number of member states.
This article is informational. Figures are based on public sources at the date of publication. Market data is regularly revised; future projections do not guarantee future returns.
Sources: Eurostat House Price Index Q4 2025 · Eurostat — Housing in Europe 2025 · ECB monetary policy December 2025 · MSCI Real Assets · CaixaBank Research