Residential real estate rental costs in Europe - statistics & facts
Since the global financial crisis, the residential rental market in Europe has been growing steadily, fueled by urbanization, and the shortage of affordable housing in larger cities. According to investors, residential real estate is one of the property types with high investment and development prospects in Europe. In 2023, 41 percent of investment-grade residential real estate was purchased by funds, making them the most active buyer group, followed shortly by developers, owners, and operators.
Conversely, renting is less common in Eastern Europe. As post-socialist countries transitioned to a market economy, public housing was privatized, leading to a spike in homeownership. In Poland, Hungary, and Romania, less than 15 percent of the population were renters in 2023. Although the residential rental sectors in these countries are smaller than in Western Europe, they have high growth potential. For example, Hungary and Poland are among the nations where residential rents have grown the most between 2015 and 2023.
The European rental sector is poised to grow, expanding beyond established markets. However, in the mature rental markets, growth is muted by insufficient supply, rental affordability, and government regulations.
Is renting common in Europe?
Although large cities offer more job opportunities than smaller settlements, they also have highly competitive housing markets. With property prices out of reach for many, renting, short- or long-term, often emerges as the only financially feasible option. In 2023, the DACH region, including Germany, Austria, and Switzerland, had the highest share of renters among the population. The developed and well-regulated rental market in these countries creates favorable conditions for investment in the sector. Additionally, the high cost of housing makes renting more affordable than buying.Conversely, renting is less common in Eastern Europe. As post-socialist countries transitioned to a market economy, public housing was privatized, leading to a spike in homeownership. In Poland, Hungary, and Romania, less than 15 percent of the population were renters in 2023. Although the residential rental sectors in these countries are smaller than in Western Europe, they have high growth potential. For example, Hungary and Poland are among the nations where residential rents have grown the most between 2015 and 2023.
Gateway cities for investment in residential rentals
Large European cities, such as London, Paris, and Madrid, have a high demand for rental housing because of the growing population and low housing affordability. They also have highly developed real estate and financial sectors, which make them popular destinations among investors. Steady price appreciation and rental growth in these gateway cities allow investors to undertake deals at lower rental yields than in secondary or tertiary cities, where risks are higher. To dampen soaring rents, some governments have introduced rent regulations, such as rent controls in France, rent caps in Spain, and rental indexation in Germany.The European rental sector is poised to grow, expanding beyond established markets. However, in the mature rental markets, growth is muted by insufficient supply, rental affordability, and government regulations.
