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30 November 2022, Europe, Germany | News

Catella European Residential Market Overview Q3 2022

All over Europe the housing markets of metropolitan and regional locations continue to show a growing demand with stagnating purchase prices at the same time. Meanwhile, people are moving back more to cities and urban centers, but yields are rising everywhere.

The analysis of European housing markets can be summed up in this headline: with the end of ECB´s zero interest rate policy, the price increase & yield decrease mechanism of the last 10 years is coming under pressure. Alternative investments in fixed-interest investments are coming back into the focus of classical investors. The phase of new pricing has begun on the European residential market.

Catella Research has again analyzed the residential real estate market of 63 cities in 20 European countries.

Here are further key findings of our analysis.

- Th average residential rent (all construction years) in our analysis of 63 cities is currently EUR 16.83 sqm.

- The cheapest rents are found in Liège (EUR 9.50 per sqm), followed by the Czech city Brno with an average rent of EUR 9.80 per sqm.

- On average, rental apartment seekers face the highest prices in London (EUR 32.25 per sqm), Geneva (EUR 31.00 per sqm) and Luxembourg (EUR 30,00 per sqm). But also Paris, Zurich, Dublin, Oslo and Amsterdam reach the mark of at least EUR 25.00 per sqm.

- The average purchase price for a condominium in Europe (all construction years) is currently EUR 5,309 per sqm. Prices range from EUR 1,850 sqm in Riga and Vilnius to EUR 15,430 sqm in Geneva.

- The average European prime yield for multifamily properties is currently 3.60 %, even lower than for office properties. Compared to our last analysis in Q1 2022, the average prime yield thus increased by 20 basis points in 6 months.

- The lowest yield of all European residential markets is found in Stockholm at 1.35 %, followed by Zurich (1.40 %).

- The most attractive yields of the 63 markets surveyed are in the Baltic cities Vilnius (5.40 %), Riga (5.35 %) and Tallinn (5.20 %).

- By the end of the year, we anticipate further yield increases in all cities by more than 10 basis points.

- With the successive increase in the key interest rate, interest rates on government bonds in Europe have also risen. In September 2021, there was an average interest rate of just 0.1 % on a 10-year government bond in the eurozone. A year later, the average interest rate in the eurozone was 2.7 %. In our comparison, the highest interest rate on a 10-year government bond in September 2022 was recorded for Poland (7.1 %), followed by the Czech Republic (5.4 %). The lowest value is recorded by Switzerland (1.3 %).

The majority of the countries have their industrial center in the capital. Urbanization and polarization effects contribute significantly to further differences between the cities of the individual countries. From an investor perspective, the European residential market continues to offer interesting diversification potential with a balanced risk/return profile,. bHowever, we should be aware that re-pricing will still take several months and local governments may introduce further market regulations.

Enjoy the analysis!

Download Catella European Residential Map Q3 2022