Housing markets in the EU: pricing characteristics
Despite their diversity, housing markets in the EU share a common problem of insufficient supply. Affordability is influenced by various factors, some of which are considered typical for the region. However, in several countries, the sector is subject to pressure from specific trends.
One of the key drivers of the European housing market is the rise in purchase and rental prices. This, in turn, puts pressure on the young population of the EU, who cannot afford to buy property. In search of more affordable housing, young people are relocating, which affects the availability of labor in a particular country.
Housing prices have risen significantly over the past 10 years. The following markets showed the highest growth:
– In Portugal, property prices rose by 85%.
– Hungary showed an increase of 80%.
– The cost of housing in Lithuania jumped 56%.
On average, prices in the European Union went up by 32%. However, prices declined in a number of countries. For instance, real estate prices decreased by 15% in Finland, 6.4% in Italy, and 2% in Romania. Among the regions, Eastern Europe showed the highest growth.
What factors influence pricing on housing markets in the EU
The key factors that shape demand for housing are:
1. Population growth and increased demand for properties
Between 2014 and 2024, Malta recorded the largest population growth — more than 28%. Luxembourg ranks second in the region with a 19% population surge. Ireland follows with a 14% rise.
2. Increase in consumer income and how much they are willing to pay for housing
Household income depends directly on GDP growth. Many Eastern European countries have experienced rapid growth in this area since joining the EU. This is due to their relatively inexpensive goods and labor force compared to other European countries. These characteristics explain why the top three countries in terms of household income growth are:
– Lithuania — an increase of 148%;
– Romania — 145%;
– Bulgaria — 142%.
Accordingly, housing prices have risen significantly in these countries. Romania is an exception. Its population has declined, and supply has increased.
3. Accessibility of mortgage lending
In the case of high-debt financing, the role of mortgages in pricing is growing. It is worth noting the specifics of lending and the maximum mortgage size indicators in relation to income or collateral value (LTV). A high LTV ratio means that fewer savings are needed to purchase real estate. This stimulates demand. After the financial crisis, many EU countries revised their standards. These changes reduced overall mortgage debt and slowed price hikes.
Generally, the EU market is implementing various programs to improve the affordability of residential real estate. However, the problem remains acute and requires more decisive measures.