Market Radar Europe: EU Affordable Housing Plan & UK Market Struggles

Written by Rory Hickman

In this week’s Market Radar Europe, we’re examining the EU's proposed affordable housing plan and financial policy outlook, UK steel and housing market challenges, and continued confidence in the UK logistics sector, highlighted by Blackstone’s strategic investments in logistics and self-storage.

EU housing plans, policy decisions, and financial stability

The European Union is introducing its first affordable housing plan to address rising rents, property speculation, and the impact of short-term rentals such as Airbnb. The plan, led by housing commissioner Dan Jørgensen, aims to protect tenants' rights and curb housing financialisation amid mounting political pressure over soaring housing costs.

Meanwhile, German Chancellor Friedrich Merz has called for a unified European stock exchange to reduce reliance on the US, supporting deeper capital market integration, and ECB President Christine Lagarde indicated that interest-rate cuts may not be over despite economic stabilisation, as inflation risks remain balanced. 

ECB members, including Joachim Nagel and Martin Kocher, have called for caution, with Nagel favouring a wait-and-see approach, while Kocher warned against excessive deregulation of banks. Concerns over inflation were raised by Madis Muller, who cautioned that China’s export controls on rare earths could disrupt supply chains and raise costs in the eurozone.

UK steel and housing markets facing challenges

The EU's plan to raise steel tariffs to 50% in response to US tariffs has sparked concerns in the UK, where 80% of steel exports go to the EU. 

Industry groups warn this could harm British producers, prompting the UK government to seek clarity from Brussels and Washington. The plan also includes tighter quotas and rules to block Chinese steel rerouting, leading UK officials to consider protective measures.

With the obvious potential for the move's impact on construction costs, the UK housing market is facing additional pressure on top of the news that over 1,500 homebuilders disappeared in the past year - the first decline in a decade. 

High mortgage rates and rising construction costs have already led to a slowdown in homebuilding, with major developers like Barratt Redrow and Persimmon launching equity loan schemes to support sales. However, the industry struggles to meet the government’s target of 1.5 million homes, and Labour’s proposal to fast-track housing projects faces hurdles.

The housing market saw a significant drop in activity in September, with new listings falling at the fastest rate in two years, while uncertainty ahead of the November Budget - including speculation about potential tax hikes - has dampened market sentiment, according to RICS, and prospects for a market recovery in the near term remain bleak.

The UK government has also launched a consultation to streamline the home-buying process, including proposals for mandatory upfront property information and digital property logbooks, aiming to reduce delays and deal collapses that cost GBP 1.5 billion annually - though critics warn that meaningful reform will take years.

Continued confidence in the UK logistics market

Contrary to ongoing challenges in the UK residential market, the country's logistics sector is seeing strong momentum, with Blackstone making significant moves in the property landscape. 

The firm has agreed to sell a GBP 1 billion logistics portfolio to Tritax Big Box REIT in a cash-and-stock deal. This transaction, which will also make Blackstone a 9% shareholder in Tritax, underscores the growing demand for high-quality logistics assets, driven largely by e-commerce.

Additionally, Blackstone is considering a takeover bid for Big Yellow Group, a leading UK self-storage operator, news of which sent the company’s shares surging by 22%. 

These moves reflect Blackstone's commitment to high-demand sectors like logistics and self-storage, aiming to capitalise on long-term growth opportunities as interest rates ease and the market stabilises.

Look out for a new edition of the GRI Institute's Market Radar Europe next week!