In 2024, the European real estate market navigated through a unique set of challenges and opportunities, shaped by a combination of economic uncertainty, shifting demographic trends, and evolving environmental and regulatory pressures. With inflationary pressures lingering, interest rates high, and the effects of the post-pandemic world still being felt, the European property landscape underwent significant transformation. Here are some of the key trends that, according to Evgeniy Kochman, international real estate expert, defined the real estate market this year.
High interest rates and buyer caution
The most immediate and pervasive influence on European real estate in 2024 remains the high interest rates set by the European Central Bank (ECB). After years of very low rates, borrowing costs have surged, making mortgages more expensive for individuals and developers alike. As a result, demand for residential properties has softened in many markets, particularly in cities where affordability was already strained.
Kochman observes that the ripple effect of these higher rates is most pronounced in the housing sector, where potential buyers are hesitating or downgrading their property aspirations. In cities like Amsterdam, Paris, and Berlin, the typical middle-class buyer is finding it increasingly difficult to enter the market. While some buyers are opting for fixed-rate mortgages to secure stability, others are choosing to rent or stay put, leading to a slowdown in transactions and a shift toward long-term leasing arrangements.
Rental market resilience
Despite the cooling of the sales market, the rental sector has shown a resilience that is surprising. High property prices and interest rates have made homeownership unattainable for many, particularly in the major metropolitan areas. This has resulted in heightened demand for rental properties, especially in cities with large student populations, young professionals, and growing migrant communities.
In cities like Barcelona, Lisbon, and Dublin, landlords have experienced rising rents, especially in central locations close to business districts and universities. To combat this, governments across Europe are intervening to impose rent controls or to offer subsidies to mitigate the impact on tenants, leading to a delicate balance between landlords’ income expectations and tenant protections.
The return of office space
The office market in Europe is also undergoing a profound transformation. The pandemic-driven shift toward remote work has led to a sustained rethinking of office space requirements. In 2024, while many companies are returning to physical offices, the demand is for more flexible, hybrid-friendly environments. Large corporations are opting for smaller, more collaborative workspaces, often located in city centre areas with easy access to public transport.
At the same time, coworking spaces in Europe are thriving. The rise of hybrid working models has increased demand for flexible office space that offers short-term leases. Cities like London, Paris, and Berlin are seeing a resurgence in demand for coworking hubs, especially in the tech and creative industries, attracting digital nomads. However, the overall demand for traditional office space has been tempered by a growing emphasis on cost efficiency, with businesses opting for smaller, more specialised locations.
Urbanization vs. suburban shift
While major cities in Europe continue to attract international talent and investment, the trend toward urbanisation is facing some headwinds in 2024. Remote working and the desire for more spacious living arrangements are prompting many families and professionals to reconsider suburban and even rural living. Suburbs around cities like London, Paris, and Milan are seeing an uptick in interest, with buyers seeking larger homes and greener spaces at more affordable prices.
This shift is also influencing the rental market, with suburban rental properties becoming more sought after. At the same time, the exodus from city centres has prompted some urban landlords to rethink their strategies, with some opting to convert properties into mixed-use spaces or affordable housing to attract renters who may no longer be interested in the traditionally higher rents of inner-city locations.
The European real estate market in 2024, Kochman observes, is at a crossroads, influenced by a volatile economic climate, shifting societal norms, and increasing environmental imperatives. While the high cost of borrowing has dampened demand for home purchases in many regions, the resilience of the rental market, the demand for flexible office spaces, and the push for sustainability are helping to redefine the landscape.
Kochman notes that for investors, developers, and policymakers alike, the key challenge will be adapting to a market in flux. The ability to navigate this transition—by offering more affordable, sustainable, and flexible options—will likely determine who thrives in Europe’s evolving real estate market in 2024 and beyond.
