Euro area rent developments: insights from the CES

Euro area rent developments: insights from the CES

This analysis, prepared by Colm Bates, Christian Höynck, Omiros Kouvavas, Desislava Rusinova, and Larissa Zimmermann, is part of the ECB Economic Bulletin, Issue 2/2025, published by the European Central Bank (ECB). The document explores recent developments in the euro area rental market using data from the ECB Consumer Expectations Survey (CES), which addresses the challenges in understanding rental expenditure due to the lack of harmonized data across the euro area.

Rents constitute a significant part of household expenditures. The average share of renter households in the euro area is approximately 28%, with rental costs accounting for about one-third of monthly household income. However, this share varies significantly across countries, from 15% in Italy to nearly 50% in Germany and Austria. Notably, the highest percentage of renters is found among lower-income households.

There is considerable variation in nominal rent levels both across different countries and within them. Ireland exhibits the highest nominal rents, whereas Greece and the Netherlands show lower dispersion. The CES highlights that rent expenditure as a percentage of income varies, with Ireland again at the top, followed by Greece and Finland, while Germany reports the lowest ratios.

The CES-based rent expenditure growth indicator indicates that rent growth has slowed after a peak in the third quarter of 2023, yet it remained above 3% throughout most of 2024. The average year-on-year growth rate in the euro area peaked above 5% in 2023 but gradually declined, with current figures showing notable differences across countries. For instance, Ireland and Portugal reported rent growth above 7%, while Germany and the Netherlands reported below 3%.

Recent data suggests that rent growth per square meter has been more significantly influenced by new rental contracts. Households that moved in the past year reported higher rent increases compared to those who did not. This trend indicates that general rent increases often start with new leases as landlords adjust prices when tenants change. Approximately 15% of renters are movers, yet they contribute to about one-third of the overall rent growth rate.

The analysis notes that recent rent growth is higher in urban areas compared to rural regions, with a widening gap. Additionally, smaller dwellings have seen greater rent growth than larger ones, contrasting with previous trends where growth rates were similar.

The CES-based rent tracker provides timely insights into the rental market, allowing for detailed monitoring of rental developments and household heterogeneity. Future analyses will aim to validate this indicator further and explore quality adjustments in rent growth by considering factors like dwelling age, location, and renovations. These efforts are essential for understanding the sustainability and dynamics of the housing market in the euro area.