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Panorama of the residential markets in Europe: key figures

19 August 2020

Property purchase when on assignment in a foreign location is a possibility. Before considering such an investment, one should know in which city to invest this year. To give you an overview of the real estate market in Europe in 2020, we have looked at the average housing price evolution in some of the most attractive European countries. Our analysis is based on Deloitte’s 8th edition of the Property Index, Overview of European Residential Markets and includes figures from the following 16 countries:

Austria, Belgium, Croatia, Czech Republic, Denmark, France, Germany, Hungary, Italy, Latvia, The Netherlands, Norway, Poland, Portugal, Spain and the United Kingdom.

In almost all these countries, housing prices have risen steadily since 2015, except Italy where prices have dropped.

The most expensive and cheapest countries:

The most expensive country is Norway, with an average of 4,043€/m², now ahead of the United Kingdom (3,753€/m²) which had the highest average cost per square meter for many years. In downtown Oslo, the price per square meter can exceed 8.000€/m².

The three countries with the lowest price per square metre are Portugal, Hungary and Poland (€1,088/m², €1,323/m² and €1,370/m² respectively).

The most expensive and cheapest capitals in Europe:

In some cities, housing has become a real luxury. The most expensive capital remains Paris at almost €13,000/m², while the city of Prague enjoys the highest growth (+22%). Its cultural wealth added to the low cost of living enables it to compete with other major capitals by attracting more and more expatriates.

Out of the 16 analysed countries, Zagreb has the lowest cost per square meter (1,720€/m²). Overall, Croatia is attracting more and more Europeans seeking to purchase a property in cities such as Dubrovnik, Zadar, Split or Hvar, as well as retirees looking for properties close to the coast, with an unbeatable quality/price ratio.

Berlin, a great opportunity

Against expectations, Berlin is in the low range, with an average price per square meter of 4.973€. Despite its rapidly rising rental prices and its attractiveness, rents are still 40% cheaper than in Paris. Low interest rates combined with high dynamism are some of the key attractive elements for investors. Furthermore, as the demand is growing, it is estimated that Berlin will need around 194,000 new homes within the next ten years.

Disparities between metropolis and provinces:

Three countries present a striking price difference between their capital and other cities.

– France: Paris is 3 times more expensive than big cities such as Lyon and Marseille. It is worth noting that it has become 4 times more expensive to live in Paris than it was 20 years ago.

– The United Kingdom: London is 3 to 4 times more expensive than Birmingham and Manchester.

– Portugal: Lisbon is slightly more expensive than Porto, which is another attractive city.

The huge pricing gap between major and other smaller cities within a country is not an isolated case, similar pricing disparities impact real estate in city versus countryside.

There is a paradoxical trend related to the type of dwelling: in Belgium, the demand for housing with outside open space has considerably increased. Lockdowns caused by the recent health crisis had a significant impact on its inhabitants who fear the consequences of being locked inside an apartment with no access to outdoor space… This may have a direct impact on the evolution of the disparity.

The development of the real estate market

To better understand and compare the evolution of the real estate market in each country, it is often useful to look at the number of built homes. When real estate pressure is high, governments often use public money to support real estate developments.

France remains the leader with more than 459,000 new built homes. We can see a clear increase in the number of building permits issued at the end of 2019, confirming optimism and strong activity in the country’s housing sector.

Latvia is in last place with only 3,000 new home constructions. The real estate market is nevertheless on the rise and is characterised by higher construction costs and therefore increasing transactional prices. New developments mainly include apartments located in the city centre of Riga and in less popular residential areas for which demand is also high.

Another key indicator is the number of dwellings built per 1,000 citizens in a given country. In general, the housing market in Europe is doing well: on average, a European country builds 3.8 dwellings per 1,000 citizens. Countries above this average are The Netherlands, France, Germany, Belgium and Poland. France overtakes other countries with an average of 6.8 constructions per 1,000 citizens. Portugal has the lowest rate with only 1.2 properties per 1,000 citizens.

 

Lack of harmonisation in Europe on property law

Whatever the choice you make, whether you are buying a property for a main residence or are looking for a rental investment, you should consider the law of the country in which your purchase takes place. Each country has its own legislation, so for example the tenancy law can vary greatly from one country to another. It is important to be well informed before taking any steps in order to avoid tricky situations (non-payment of rent, etc.) which would inevitably cause you stress and anxiety. Therefore, call on professionals (real estate agency, lawyer, asset manager) and even an interpreter if necessary. Being well prepared in advance will allow you to invest with peace of mind, or without negatively impacting your expatriation.

investment real estate

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