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26 May 2021, Europe | News

Catella European Residential Market Map Q1 2021

Once again, Catella Research has analysed the commercial residential real estate markets in 61 cities and 19 countries in Europe. It is evident that even the current pandemic phase afflicting Europe has shown little change in its effects on the investor and transaction markets. Demand in the low interest rate environment remains very high.

This is reflected by further increases in average purchase prices and rents since our last reporting period in October 2020. This was accompanied by renewed sustained yield compression within the residential asset class. Even rising long-term interest rates and sporadic inflation concerns are currently unable to stop commercial housing demand.

Here are other key findings from our analysis for Europe:

  • The average monthly apartment rent (all construction years) in our 61 analysed cities is currently €15.46/sqm, down 0.9% compared to last year's survey in Q3 2020.
  • Affordable rents are found in Liège (€9.30/sqm) in Belgium, followed by the Spanish city of Malaga with an average of €9.40/sqm and Brno (€9.50/sqm) in the Czech Republic.
  • The most expensive rental market is in Geneva, Switzerland, at over €30.00/sqm. In Luxembourg, prices have risen by a total of 16% to €29.00/sqm, and the sought-after cities of Paris and Dublin also continue to be high-priced residential locations in Europe.
  • The average purchase price for an apartment in Europe (all construction years) currently stands at €5,017/sqm, completing a strong increase of 4.15% over six months. Prices range from €1,700/sqm in Riga to €15,430/sqm in London.
  • London remains the most expensive market for condominiums, but the average purchase price has fallen further by 8.4% over the past six months. Geneva follows in second place with an average purchase price for apartments of €13,760/sqm (+4.2%).
  • The average European prime yield for multi-family houses has fallen to 3.19%, standing 0.47% lower than six months ago. This is mainly due to falling yields in a clear majority of European countries. By contrast, yields in England and the Netherlands are stagnating.
  • The lowest yield of all European residential markets can be found in Stockholm (for existing apartments) at 1.30%, followed by Zurich at 1.40%.
  • The most attractive prime yields of the 61 markets analysed are in the Baltic cities of Riga and Vilnius at 5.35%, followed by Wroclaw in Poland at 5.4%.
  • By the end of the year, we expect yields to continue to fall slightly in many European locations.

Our conclusion:

Demand for European residential real estate remains extremely high, and the increasing "addition of residential" in investment vehicles that were previously primarily office- or retail-focused is also giving the market a special dynamic. These markets continue to offer potential to investors seeking diversification opportunities and a balanced risk/return portfolio on the European markets. Large agglomerations or capital cities are currently the most sought-after markets with positive socio-economic development and strong price increases. On the other hand, however, these markets are significantly more volatile and heterogeneous than B-cities, especially in times of significantly changing economic signs, increasing political intervention in price formation and structural effects of the post-pandemic phase that are still difficult to assess.


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