Europe’s housing shortage worsens in Q1, rents up 2.4%

Europe's housing shortage worsened in the first quarter of 2025, with rents rising significantly, up 2.4% over the past six months.

Residential project by Catella

While some housing markets saw purchase prices recover moderately, others continued to decline. 
Low new construction combined with high demand is creating supply shortages and increasing overcrowding in rental apartments, according to the Catella Residential Market Overview Q1/2025, which analyzes 59 cities across 16 European countries.
Dr. Lars Vandrei, head of Research at Catella Investment Management (CIM), commented: “The first quarter of 2025 was once again marked by considerable uncertainty. Nevertheless, we observed moderate growth in purchase prices and stabilized yields. Demand in the rental market remains strong, as reflected in rising rental prices and increasing overcrowding.”
Rents increased in 48 of the 59 European cities analyzed, reaching an average of €20.02/m² per month—a 2.4% jump from the previous six months. Dublin saw the highest average rent at €40.00, followed by London (€39.30) and Geneva (€34.50). Leipzig, Liège, and Graz had the lowest rents, all below €11.10/m².
Condominium prices increased in slightly over half of the 59 European cities studied, with the average price reaching €5,696/m²—a 0.9% rise from the previous six months. Geneva (€15,720/m²), Zurich (€13,870/m²), and London (€13,440/m²) remain the most expensive cities, while Jyväskylä (€2,240/m²) and Oulu (€2,370/m²) in Finland offer the most affordable housing. Copenhagen, Gothenburg, and Madrid experienced the largest price increases, ranging from 9.6% to 11.9%.
Average prime yields for multi-family residential properties in Europe held steady at 4.58%. Stockholm, Zurich, and Geneva offered the lowest yields (2.50% to 2.70%), while Cork, Krakow, Wroclaw, and Warsaw had the highest yields, ranging from 5.75% to 6.25%.
Rents rose in all surveyed German cities. Munich remains the most expensive rental market (€24.50/m²), followed by Frankfurt (€19.50/m²) and Stuttgart (€18.30/m²). Munich also leads the ownership market, nearing €10,000/m², with Frankfurt (€6,980/m²) and Hamburg (€6,810/m²) next. Leipzig is the most affordable of Germany's major cities (€3,280/m²) and offers the highest prime yields (5.25%), while Munich has the lowest (4.20%).
A growing rental housing shortage in Europe is reflected in rising overcrowding, with an increasing percentage of people living in homes without enough rooms. While overall overcrowding in the EU decreased from 18.1% to 16.9% between 2014 and 2023, it rose significantly among renters, from 20.4% to 24.4%. Northern and Eastern Europe face the most severe overcrowding, but notable increases are occurring in Western and Southern Europe, particularly among renters in Germany, Belgium, Spain, and Ireland. In Germany, for example, the proportion of renters in overcrowded housing jumped from 11.5% to 18.4% over the past decade.