European rental gap widens as new leases outpace existing contracts

According to Catella Research's Q3 2025 European Residential Market Overview, a growing disparity is emerging between rents for new leases and those for existing contracts. 

European residential market overview - Catella

While existing rents have risen slowly, new lease rents continue to climb, albeit at a slightly reduced pace. Purchase prices are also increasing moderately, and yields are stabilising. This report analyses 59 cities across 16 European countries.
The European Commission highlights a systemic housing shortage, estimating that the EU lacks millions of affordable homes, especially for young and low-income individuals. They attribute rent increases primarily to new leases and insufficient housing supply, rather than existing rental agreements.
Market data reveals that rising rent prices are driving purchase prices. Average European rents reached €20.43/m2 per month in Q3 2025, a 2.1% increase from Q1 and 4.5% year-on-year. Dublin remains the most expensive at €45.00/m2, followed by London (€39.50/m2) and Zurich (€33.60/m2), while cities like Leipzig (€10.30/m2) and Liège (€11.10/m2) are more affordable.
European purchase prices have stabilised, averaging €5,795/m2 in Q3 2025, a moderate 1.7% increase over six months and 2.7% year-on-year. Prime yields are stable at 4.57%, with transaction price increases linked to higher rents.
In Germany, average rents in the eight largest cities show minimal change. While overall levels are stable, Berlin (€17.00/m2), Hamburg (€16.90/m2), Munich (€24.00/m2), and Cologne (€15.10/m2) recorded slightly lower average rents, largely due to a higher proportion of cheaper existing units in the data.
Conversely, condominium purchase prices in Munich and Stuttgart statistically decreased slightly, but other German markets like Cologne (+5%) and Düsseldorf (+7%) saw increases compared to Q1 2025. Yields have declined across all eight major German cities, with Berlin and Munich at the lowest (3.90%) and Leipzig offering the highest (5.00%).
Catella also examines the "lock-in effect," where mobility is restricted. Their analysis shows that housing costs, on average, have not outpaced other living expenses. Over the past five years, EU consumer prices rose 4.8% annually, while actual rents increased by only 2.6%. Exceptions include Ireland, Portugal, and Poland, where actual rents grew faster. Market rents in Spain, Ireland, Portugal, and Poland rose particularly sharply (Spain seeing an average annual increase of 8.7%). The Netherlands and Poland are unique in that market rents grew more slowly than actual rents.
Lars Vandrei, head of Research at Catella Investment Management (CIM), stated: “Housing scarcity is no longer a temporary issue but a structural market distortion,” says “The widening gap between existing and new rental contracts shows that housing cost pressure arises primarily when households move – not within ongoing tenancies. The resulting market distortion leads to misallocations that are not only suboptimal for households themselves but also produce inefficient market outcomes and thus economic damage.”
Petra Blazkova, head of Catella Group Research and Strategy, added: “Across Europe, residential rents increased the fastest in Ireland with a 12.3 % annual increase over the past five years. The Irish economy and its residential market, despite being more cyclical, benefited post-Brexit and gave the country a corporate advantage in the current global geopolitical uncertainties. The core problem, however, lies elsewhere: market rents based on new leases have increased twice as fast as compared to existing contracts, not only in Ireland but across most European cities.”