"The trajectory of the European residential real estate market in 2025 will largely depend on the evolution of trade policy between the United States and Europe," states the Alpha Bank Economic Analysis Department in its report "The Residential Real Estate Market in Europe." The report examines recent developments in the Euro Area, country-specific trends, and emerging risks for the European housing market, with a particular focus on Greece.
The residential property market in the Euro Area (EA) shows signs of recovery in 2025, following a decade-long upward trend that was briefly interrupted in 2023 by a mild and short-lived price correction. In nominal terms, the housing price index increased by 2.0% in 2024, reaching its highest level since 2000 (145.7 index points). In real terms, however, there was a marginal decline of 0.5%.
At the same time, a broad-based recovery in real estate transactions was observed across most EA countries, although the magnitude of price changes varied significantly among member states. Countries such as Croatia, Lithuania, Portugal, Greece, Spain, and the Netherlands recorded annual price increases exceeding 8%, whereas France, Germany, and Austria experienced housing price declines, coupled with rising rents.
This overall improvement was supported by the European Central Bank’s (ECB) monetary policy, which implemented eight consecutive interest rate cuts between June 2024 and June 2025, lowering the deposit facility rate from 4% to 2%. This policy shift had a positive effect on housing demand by improving household credit capacity and contributing to a moderate decline in the price-to-income ratio—from 114.9 in 2022 to 103.5—indicating a slight enhancement in housing affordability.
However, improvements in housing affordability have not been uniform across countries. In particular, nations such as Portugal, Greece, Slovenia, and Estonia have experienced increases in the price-to-income ratio, indicating that housing costs remain disproportionately high relative to household incomes.
At the same time, the supply side of the housing market remains particularly problematic. The sharp decline in building permit issuance, which began in 2022 in response to rising interest rates, continued into 2024, with an overall annual decrease of 5.5%. Yet the picture is not uniform: while countries such as Greece, Spain, and the Netherlands recorded notable increases in building permits, others—such as Germany, Slovakia, and France—saw significant declines. This limits the availability of new housing and fuels upward pressure on prices.
The short-term outlook for the housing market is influenced not only by domestic factors but also by broader geopolitical and trade-related uncertainties. The potential imposition of tariffs by the United States on European products, along with possible trade disputes, may negatively impact construction activity by driving up the cost of essential building materials such as steel, aluminum, and timber. This, in turn, would increase the cost of new housing developments and could significantly delay projects, exacerbating supply constraints.
Businesses in the construction sector—especially small and medium-sized enterprises—are already facing considerable challenges, including labor shortages, rising input costs, and instability in supply chains. If trade tensions escalate further, the real estate sector could experience a downturn, characterized by reduced transaction volumes and heightened caution from both households and investors.
The ongoing cost-of-living crisis and the growing inequality in access to affordable housing necessitate urgent policy intervention. Existing initiatives in several countries, including Greece, are widely regarded as insufficient for achieving long-term improvements in living standards.
The European Commission has already prioritized the implementation of a Social Housing Policy through the European Affordable Housing Plan. This plan advocates for increased public investment, the facilitation of public-private partnerships (PPPs), the use of tax incentives, and the mobilization of private capital.
A sustainable long-term solution requires active market participation and the establishment of an institutional framework that makes investment in affordable housing not only viable but also attractive to investors.
The housing market is a critical pillar of social cohesion and economic stability. The key challenge for 2025 and beyond is to ensure not only the recovery of the sector but also universal access to decent, sustainable, and affordable housing for all.
