The Catella Q3/2024 analysis reveals a positive trend in European housing markets, with London remaining the most expensive rental market amid uncertainties.

The Catella Residential Market Overview for Q3/2024 presents a fascinating tableau of the European housing landscape, revealing a surprising resilience amidst the swirling tempest of economic uncertainties. It appears that, contrary to the prevailing narrative of decline, the housing markets across several metropolises are experiencing a renaissance of sorts. After a period marked by price contractions, we are now witnessing a resurgence in both apartment prices and rental rates—a phenomenon that merits closer scrutiny.

This stabilization is particularly noteworthy given the backdrop of ongoing economic volatility. Factors such as reduced financing costs and a deceleration in construction activity are pivotal in this narrative. The report, meticulously compiled by the esteemed real estate investor and fund manager Catella, encompasses insights from 58 cities across 16 European nations, illustrating that demand remains robust in numerous urban centers.

In the rental market, the trend is unequivocal: rents are on the rise. A staggering 53 out of the 58 cities surveyed reported increases, with the average rent now standing at 19.70 euros per square meter—an impressive uptick of 4.1 percent since the first quarter of 2024. London continues to reign supreme as the most expensive rental market, commanding a princely 37.60 euros per square meter, followed closely by Dublin at 25 euros/m² and Geneva at 34.70 euros/m². Conversely, at the lower end of the spectrum, we find Liège and Graz, each languishing at a mere 11.00 euros per square meter.

Turning our gaze to Austria, Innsbruck emerges as the most expensive locale, with rents peaking at 21.50 euros per square meter, followed by Salzburg and Vienna. The condominium market, too, is experiencing a renaissance, with prices climbing in 45 of the 58 cities surveyed, averaging a 2.1 percent increase. Switzerland’s high prices are particularly striking, with Geneva leading the pack at an astonishing 15,770 euros per square meter.

Interestingly, Polish cities are witnessing the most pronounced price increases, with Warsaw, Krakow, and Wroclaw experiencing surges of up to 21 percent in the last quarter alone. Meanwhile, Finland remains a bastion of affordability, with Lahti and Jyväskylä offering the lowest prices at 1,640 euros/m² and 2,310 euros/m², respectively.

For investors, the prime yields for apartment buildings across Europe currently hover around 4.59 percent, reflecting a slight uptick from the previous quarter. Cities like Cork, Krakow, and Wroclaw are particularly enticing, boasting yields of 6.00 percent or more. In stark contrast, the most expensive markets—Stockholm, Zurich, and Geneva—offer yields closer to 2.5 percent, rendering them less appealing for investment.

However, a disconcerting trend looms on the horizon: the decline in building permits across many European nations. On average, the EU has witnessed a 23 percent reduction in permits over the past two years, with Finland, Sweden, and Germany being particularly hard-hit. This contraction could exacerbate the already precarious housing situation, potentially driving rents even higher. Yet, there is a glimmer of hope in countries like Portugal and Spain, where the number of newly approved apartments has seen a positive uptick.

The Catella Residential Market Overview for Q3/2024 paints a picture of cautious optimism. Despite the persistent economic uncertainties, the residential markets in Europe are exhibiting remarkable stabilization and positive trends. Lower financing costs and sustained demand are propelling prices upward in both the rental and property sectors. Nonetheless, the specter of declining construction activity poses a significant challenge that could further strain housing availability. For astute investors, particularly in medium-sized cities with higher yields, opportunities abound amidst this complex landscape.