Credit: Adobe StockIs Europe’s housing market finally reaching a breaking point?
Key takeaways from the Deloitte Property Index 2025 on the affordability crisis and evolving property trends across Europe
September 5, 2025Real Estate
Written by Rory Hickman
The European housing market's significant affordability crisis continues to plague the region, with rising property prices and limited supply creating challenges for both homeowners and renters alike. This issue has been exacerbated by high borrowing costs, making it increasingly difficult for many to enter the property market.
Cities across the continent are experiencing a growing demand for affordable housing, yet the gap between income levels and housing prices continues to widen, particularly in major urban centres.
While markets in some regions, including Central and Eastern Europe, are seeing more affordable prices, top cities such as London, Paris, and Munich are still grappling with high costs and low inventory.
The result has been a continuation of the "wait and see" approach from buyers, particularly in areas where potential property tax reforms, such as a national property tax on high-value homes, are fuelling uncertainty.
United Kingdom
The UK’s residential market experienced a modest decline in new dwelling prices in 2024, with an average price of EUR 5,203 per sqm, down by 0.9% from the previous year. Despite this, demand remained steady in some regions, notably in London, as limited supply continued to exert upward pressure on prices.
Germany
Germany’s housing market faced challenges in 2024, marked by high inflation, interest rates, and construction costs. The average price for new dwellings in Germany was EUR 4,800 per sqm, increasing slightly by 2.1%. Major cities like Berlin and Munich saw stagnant prices due to reduced buyer demand, but suburban areas and energy-efficient homes maintained stronger demand.
France
In France, residential property prices fell for the fifth consecutive quarter, with an average price of EUR 3,332 per sqm, reflecting a 1.7% decrease. The rental market saw a price increase higher than inflation, with demand for small apartments remaining strong, particularly in Paris.
Spain
Spain’s residential market showed positive momentum with an 8.8% rise in average prices, reaching EUR 3,739 per sqm. Despite challenges in financing and demand pressures, price increases were notable across major cities such as Madrid and Barcelona.
Portugal
Portugal’s housing market continued to show upward price trends, with an average price of EUR 5,049 per sqm. Lisbon and the Algarve saw the highest asking prices, averaging EUR 4,618 per sqm (+0.1% YoY) and EUR 4,269 per sqm (+2.1% YoY), respectively. Strong demand coupled with limited supply drove this price increase.
Italy
Italy recorded an 11.2% increase in residential property prices, with the average price reaching EUR 2,741 per sqm. The demand in cities like Milan, Rome, and Bologna continued to rise, though the rental market faced challenges with a shrinking supply.
CEE (Central and Eastern Europe)
CEE markets showed mixed trends in 2024. Poland saw the largest price increase of 19.3%, with an average price of EUR 2,792 per sqm, driven by a government subsidy scheme. Other CEE markets such as Romania and Hungary also saw notable price growth, although the affordability issue continued to put pressure on household budgets.
Pan-European
The residential market across the countries analysed by Deloitte remained generally volatile, with some countries experiencing price growth, such as Poland and Hungary, while others faced price declines, including Turkey.
The average bid price for new dwellings varied significantly, with the highest in Luxembourg (EUR 8,760 per sqm) and the lowest in Turkey (EUR 949 per sqm). The gap between wage growth and property price inflation continued to widen, exacerbating the affordability crisis.
International Investment
Despite these challenges, the European property market continues to attract international interest, particularly from Gulf investors. According to the Deloitte report, and as reported in last week’s GRI Insights Europe newsletter, UAE nationals are increasingly investing in the UK’s real estate market, with a notable rise in the purchase of prime central London properties.
◾ You can access the full Deloitte Property Index 2025 here.
The focus is shifting more and more towards sustainable, energy-efficient, and ESG compliant living spaces, as both developers and investors acknowledge the need to future-proof their investments.
However, despite efforts to address the crisis, the pace of new housing development remains slow, with rising construction costs and regulatory hurdles adding further pressure to an already strained system.
Left unchecked, this imbalance will deepen social inequality, constrain labour mobility, and weaken the long-term resilience of cities. The challenge now is less about recognising the problem, and more about whether governments, developers, and investors can act at the speed and scale required to make meaningful change.
◾ For more insights on the challenges facing housing markets, download the full European Living Assets Outlook below:
The European housing market's significant affordability crisis continues to plague the region, with rising property prices and limited supply creating challenges for both homeowners and renters alike. This issue has been exacerbated by high borrowing costs, making it increasingly difficult for many to enter the property market.
Cities across the continent are experiencing a growing demand for affordable housing, yet the gap between income levels and housing prices continues to widen, particularly in major urban centres.
Deloitte’s Data
The recent Deloitte Property Index 2025 reveals that long-term borrowing costs in the UK are nearing their highest levels since 1998, placing additional strain on the housing market and causing homeownership to slip further out of reach for many.While markets in some regions, including Central and Eastern Europe, are seeing more affordable prices, top cities such as London, Paris, and Munich are still grappling with high costs and low inventory.
The result has been a continuation of the "wait and see" approach from buyers, particularly in areas where potential property tax reforms, such as a national property tax on high-value homes, are fuelling uncertainty.
United Kingdom
The UK’s residential market experienced a modest decline in new dwelling prices in 2024, with an average price of EUR 5,203 per sqm, down by 0.9% from the previous year. Despite this, demand remained steady in some regions, notably in London, as limited supply continued to exert upward pressure on prices.
Germany
Germany’s housing market faced challenges in 2024, marked by high inflation, interest rates, and construction costs. The average price for new dwellings in Germany was EUR 4,800 per sqm, increasing slightly by 2.1%. Major cities like Berlin and Munich saw stagnant prices due to reduced buyer demand, but suburban areas and energy-efficient homes maintained stronger demand.
France
In France, residential property prices fell for the fifth consecutive quarter, with an average price of EUR 3,332 per sqm, reflecting a 1.7% decrease. The rental market saw a price increase higher than inflation, with demand for small apartments remaining strong, particularly in Paris.
Spain
Spain’s residential market showed positive momentum with an 8.8% rise in average prices, reaching EUR 3,739 per sqm. Despite challenges in financing and demand pressures, price increases were notable across major cities such as Madrid and Barcelona.
Portugal
Portugal’s housing market continued to show upward price trends, with an average price of EUR 5,049 per sqm. Lisbon and the Algarve saw the highest asking prices, averaging EUR 4,618 per sqm (+0.1% YoY) and EUR 4,269 per sqm (+2.1% YoY), respectively. Strong demand coupled with limited supply drove this price increase.
Italy
Italy recorded an 11.2% increase in residential property prices, with the average price reaching EUR 2,741 per sqm. The demand in cities like Milan, Rome, and Bologna continued to rise, though the rental market faced challenges with a shrinking supply.
CEE (Central and Eastern Europe)
CEE markets showed mixed trends in 2024. Poland saw the largest price increase of 19.3%, with an average price of EUR 2,792 per sqm, driven by a government subsidy scheme. Other CEE markets such as Romania and Hungary also saw notable price growth, although the affordability issue continued to put pressure on household budgets.
Pan-European
The residential market across the countries analysed by Deloitte remained generally volatile, with some countries experiencing price growth, such as Poland and Hungary, while others faced price declines, including Turkey.
The average bid price for new dwellings varied significantly, with the highest in Luxembourg (EUR 8,760 per sqm) and the lowest in Turkey (EUR 949 per sqm). The gap between wage growth and property price inflation continued to widen, exacerbating the affordability crisis.
International Investment
Despite these challenges, the European property market continues to attract international interest, particularly from Gulf investors. According to the Deloitte report, and as reported in last week’s GRI Insights Europe newsletter, UAE nationals are increasingly investing in the UK’s real estate market, with a notable rise in the purchase of prime central London properties.
◾ You can access the full Deloitte Property Index 2025 here.
Housing affordability was a key topic of discussion at GRI Living Assets Europe 2025 in London (GRI Institute)
GRI Living Asset Assessment
Insights shared by industry leaders in the GRI Institute’s recent Living Assets Outlook 25/26 report echo these sentiments, noting that the demand for rental properties is growing as affordability challenges push more people into the rental market, with leading institutions increasingly looking to Build-to-Rent (BTR) solutions to meet this ever-growing demand.The focus is shifting more and more towards sustainable, energy-efficient, and ESG compliant living spaces, as both developers and investors acknowledge the need to future-proof their investments.
However, despite efforts to address the crisis, the pace of new housing development remains slow, with rising construction costs and regulatory hurdles adding further pressure to an already strained system.
From Analysis to Action
Europe’s housing affordability crisis is no longer a warning sign on the horizon - it is the defining pressure point for the continent’s urban markets. Years of under-supply, cost inflation, and policy gridlock have created a system where the basic need for secure, reasonably priced housing is increasingly out of reach for large parts of the population.Left unchecked, this imbalance will deepen social inequality, constrain labour mobility, and weaken the long-term resilience of cities. The challenge now is less about recognising the problem, and more about whether governments, developers, and investors can act at the speed and scale required to make meaningful change.
◾ For more insights on the challenges facing housing markets, download the full European Living Assets Outlook below: