Housing Shortage in Europe further deteriorates

This press release was published by Catella Investment Management (CIM) on May 27, 2025, focusing on the ongoing housing crisis in Europe, highlighting the rising rental prices, supply shortages, and increased overcrowding. CIM is an independent real estate investment advisor managing approximately EUR 10 billion in assets, providing advisory services across 15 European countries.

In the first quarter of 2025, rental prices across Europe continued to rise, with 48 out of 59 analyzed cities experiencing increases. The unweighted average rent in Europe reached €20.02 per square meter per month, marking a 2.4% increase from the previous quarter. Dublin recorded the highest rents at €40.00/m², followed by London at €39.30/m² and Geneva at €34.50/m². Conversely, the lowest rents were in Leipzig (€10.30/m²), Liège (€11.05/m²), and Graz (€11.10/m²).

While rental prices are on the rise, purchase prices exhibit mixed trends; 31 of the 59 cities reported increases in condominium prices, with an average price of €5,696/m², reflecting a 0.9% rise compared to Q3 2024. The highest property prices are found in Geneva (€15,720/m²), Zurich (€13,870/m²), and London (€13,440/m²). Notably, the most affordable prices are in Jyväskylä (€2,240/m²) and Oulu (€2,370/m²) in Finland.

Persistently low levels of new construction amidst high demand have resulted in significant supply shortages in many European cities, exacerbating the issue of overcrowding in rental apartments. The report indicates that household overcrowding has increased, with 24.4% of renters living in overcrowded conditions, up from 20.4% in 2014. This situation is particularly pronounced in Northern and Eastern Europe, while Western and Southern European countries are also witnessing rising overcrowding rates.

In Germany, rental markets exhibited increases across all analyzed cities. Munich leads as the most expensive rental market at €24.50/m², followed by Frankfurt at €19.50/m² and Stuttgart at €18.30/m². The ownership market remains dominated by Munich, where prices are just below €10,000/m². Overcrowding rates in Germany have sharply risen, with 18.4% of renters now living in overcrowded housing, a significant increase from 11.5% a decade ago.

The ongoing housing shortage and rising rental prices signify a critical challenge for sustainable urban development in Europe. The pressing need for affordable housing solutions is underscored by the increase in overcrowding, which has implications for the quality of life and social equity in urban areas. The report highlights the necessity for a concerted effort to address these challenges through sustainable housing initiatives and policies.

For more detailed information, readers can access the full report available at Catella's website.