Europe’s House Prices Rise Again

Europe’s housing market is gaining momentum again after the pause caused by higher interest rates and weaker buyer activity in 2022–2024. In the fourth quarter of 2025, house prices in the European Union rose 5.5% year on year, while rents increased 3.2%, according to Eurostat. The strongest growth was recorded not only in wealthy capitals but also in markets shaped by supply shortages, state support schemes, tourism demand and foreign buyers.

EU house prices are again outpacing rents

The European housing market ended 2025 in recovery mode. Compared with the third quarter, EU house prices increased 0.8%, while rents rose 0.6%. That means the market is no longer in a sharp correction phase, but it has not returned to uniform growth: a wide gap has opened between countries where prices rose by more than 15% to 20% and markets where values barely moved or continued to decline.

Euronews Business says more predictable financing conditions were a key driver of the turnaround. After the period of sharply higher rates, buyers who had postponed purchases began returning to the market, while more stable bank rates made mortgage calculations easier. The recovery in demand, however, met an old problem: in many cities, new housing supply remains insufficient.

The important point is that house prices are again rising faster than rents. Between 2015 and the fourth quarter of 2025, EU house prices increased 64.9%, while rents rose 21.8%. That widens the gap between existing homeowners and households still trying to enter the market.

Hungary led Europe’s price growth

The sharpest increase in the fourth quarter of 2025 was recorded in Hungary, where house prices rose 21.2% year on year. That was the highest figure among the markets covered by Eurostat. Experts cited by Euronews Business point to state-backed homeownership schemes, subsidized support and strong investor activity as major drivers.

Hungary shows how quickly public support can boost demand when supply is constrained. When buyers receive easier access to credit or subsidies, applications can rise faster than the market can deliver new homes. As a result, support intended to improve affordability can partly turn into higher prices.

Eurostat’s long-term data confirm the scale of the Hungarian cycle. From 2015 to the fourth quarter of 2025, house prices in Hungary rose 290%, almost quadrupling. Rents rose 109% over the same period, also the highest increase in the EU.

Portugal, Croatia and Spain are lifted by southern Europe demand

In the euro area, the fastest markets were Portugal, Croatia and Spain. Prices rose 18.9% year on year in Portugal, 16.1% in Croatia and 12.9% in Spain. These countries have more in common than recovering mortgage demand: all remain highly attractive to foreign buyers, tourists, remote workers, retirees and second-home purchasers.

Portugal remains a clear case of limited supply meeting international demand. Lisbon, Porto, coastal areas and suburban zones have long faced pressure from restricted construction, tourism and investor interest. Euronews Business also highlights a state guarantee scheme for young first-time buyers, allowing up to 100% mortgage financing with the state guaranteeing up to 15% of the property value.

Spain stands out among the EU’s largest economies. With population growth, tourism, internal migration and foreign capital supporting demand, prices increased almost 13%. Madrid, Valencia, Barcelona, Málaga and coastal areas continue to face pressure, while short-term rentals and second-home purchases increase competition with local residents.

Croatia is another tourist-driven market where property prices are rising faster than local incomes. Coastal cities and island destinations attract buyers from other EU countries and investors focused on rentals. But this demand creates political risk: the more prices detach from local wages, the sharper the affordability debate becomes.

Central and Eastern Europe entered a new growth wave

High growth was not limited to southern Europe. Prices rose 12.8% in Slovakia, 12.6% in Bulgaria, 11% in Latvia, 10.8% in Lithuania and 10.4% in Czechia. These markets often remain cheaper than Western Europe in absolute terms, but they react quickly to income growth, credit availability and shortages of modern housing.

For Central and Eastern Europe, the key is a mix of economic growth, urbanization and construction costs. Stronger economies support demand, urbanization concentrates buyers in capitals and major cities, and building costs remain elevated after the inflation shock of 2021–2024. As a result, even a moderate recovery in mortgage lending can quickly move prices.

Eurostat’s long-term data show that the region has already undergone a major housing revaluation. From 2010 to 2024, EU house prices rose 53%, but the increases were much larger in several countries: 231% in Hungary, 228% in Estonia and 179% in Lithuania. Over the same period, the cost of building new residential properties in the EU rose 56%, with especially sharp increases in Hungary, Bulgaria and Romania.

France and Germany lagged behind the new wave

Europe’s largest economies did not move in sync. Among the EU’s four biggest economies, Spain was the clear outlier with a 12.9% increase. Italy rose 4.1%, Germany 3%, while France posted just 1%, placing it near the bottom of the European ranking.

France is still emerging from the correction of 2023–2024. Higher mortgage rates, inflation and weaker purchasing power cooled transactions sharply, especially in large cities and older housing. Paris and some regional centers have stabilized, but buyers are now more demanding on pricing, energy performance and renovation costs.

Germany is also recovering slowly after falling prices and developer distress. The market is weighed down by expensive construction, limited new supply, cautious lending and weak economic momentum. A 3% nominal increase suggests the decline has probably stopped, but a broad return to boom conditions is not yet visible.

Finland remained the only declining market

Finland was the only country among 29 European markets where house prices fell in the fourth quarter of 2025. The decline was 3.1% year on year. That makes Finland stand out from the broader European recovery and shows that lower-rate expectations and returning buyers do not work evenly across countries.

The Finnish market remains under pressure after weak economic conditions, cautious demand, household sensitivity to interest rates and a large share of borrowers exposed to floating or frequently reset borrowing costs. Where debt costs pass through more directly to household budgets, demand takes longer to recover.

The comparison with southern Europe is revealing. In Portugal, Spain and Croatia, foreign demand and tourist rentals support prices even when credit is expensive. Finland depends more heavily on domestic buyers, local incomes and household confidence.

Rents are rising more slowly, but tenants remain under pressure

EU rent growth of 3.2% in the fourth quarter of 2025 was below house price growth, but that does not mean relief for households. Rents often move more gradually because contracts are adjusted over time and regulation limits sharp increases in several countries. Yet the accumulated rise is large: between 2010 and 2024, EU rents increased 25%, with even larger gains in some overheated markets by the end of 2025.

Eurostat estimates that in 2024 EU households spent an average of 19% of disposable income on housing. In cities, almost 10% of the population lived in households where housing costs exceeded 40% of disposable income; in rural areas the share was 6%. The highest urban housing cost overburden rates were in Greece and Denmark.

That explains why rising house prices quickly become political. Owners benefit from asset appreciation, but renters and first-time buyers face a higher entry barrier. For young people, migrants, service workers and families without inherited wealth, housing is becoming a central channel of inequality.

Mortgages brought demand back but did not solve supply shortages

Stabilizing rates in late 2024 and 2025 were a key reason buyers returned. Once the market understands that borrowing costs are no longer rising every month, households and investors can plan transactions again. But rates alone do not create new supply. If construction is constrained and permits move slowly, recovering credit quickly turns into higher prices.

The European Central Bank said in 2025 that the earlier rate-hiking cycle would continue to affect household mortgage costs with a lag because many loans reset gradually. That means that even when new rates stabilize, some borrowers are still feeling the effect of expensive credit, and consumption can remain under pressure.

For housing, this creates a dual picture. New buyers face more predictability, but affordability remains worse than during the years of ultra-low rates. Sellers in strong markets regain pricing power, while buyers in weaker economies continue to wait for discounts.

Tourist markets are becoming a political conflict

The sharpest price growth is visible where ordinary housing demand competes with international capital and tourism. Portugal, Spain and Croatia show how a country’s appeal for living, holidays and remote work can quickly become a problem for local residents.

Short-term rentals intensify the conflict. When an apartment can generate more revenue through tourist platforms, owners have less incentive to offer long-term leases to local families. In tourist cities, this reduces permanent housing supply and raises rent expectations.

The European Commission has already put affordable housing and short-term rentals on the EU policy agenda. At the end of 2025, Brussels presented a plan to address the affordable housing shortage, including future rules on short-term rentals and greater flexibility to support social and affordable housing construction.

The 2026 market will be defined by divergence

The data from late 2025 do not show a single European housing cycle. They show divergence. Hungary, Portugal, Croatia, Spain and parts of Central Europe enter 2026 with overheated demand. France, Germany and Finland remain cautious markets after correction. Italy sits in between, with moderate growth and regional variation.

For investors, the EU average is of limited strategic value. A 5.5% increase hides a market where Hungary gained more than 21%, Portugal almost 19%, and Finland declined. Country, city, district, building quality, energy performance, rental regulation and the share of foreign buyers matter more than the headline European trend.

For governments, the main question is how to avoid repeating the mistake of supporting demand without expanding supply. Subsidized mortgages, guarantees and tax incentives help buyers only when they are paired with new construction, renovation of older housing and expansion of long-term rental supply.

As International Investment experts report, the rise in European house prices in 2025 should not be read simply as a sign of market health. It is a recovery after an interest-rate shock, but it is taking place against a background of chronic supply shortages, tourism pressure and unequal access to credit. The main risk for 2026 is that the fastest-growing countries again try to address affordability by subsidizing demand, while the durable solution lies in construction, long-term rental supply, renovation of older stock and curbing speculative use of scarce apartments.

FAQ in English

How much did EU house prices rise in 2025?

In the fourth quarter of 2025, EU house prices rose 5.5% compared with the same quarter of 2024. Compared with the third quarter of 2025, prices increased 0.8%.

Which country had the fastest house price growth?

Hungary led the ranking with a 21.2% year-on-year increase. Portugal followed with 18.9%, Croatia with 16.1% and Spain with 12.9%.

Why are house prices rising again in Europe?

The main drivers are stabilizing mortgage rates, returning delayed demand, limited supply, higher construction costs, state support schemes and foreign buyer demand in tourism-oriented countries.

Which country saw prices fall?

Finland was the only market among 29 European countries in the review where house prices declined. Prices fell 3.1% year on year.

Why is Spain growing faster than France and Germany?

Spain combines domestic demand, tourism, foreign purchases, population growth and limited new supply. France and Germany are still recovering from corrections caused by higher mortgage rates and weaker buyer activity.

What does this mean for buyers in 2026?

Buyers need to assess financing costs, location, energy performance, rental regulation and resale liquidity more carefully. In overheated markets, the risk of overpaying is higher, while weaker markets may offer more room for negotiation.