Thursday, 16 July 2026
Residential property markets across Europe continued to strengthen during the first quarter of 2026, with house prices and rental costs rising in most countries despite easing inflation. While improving financing conditions have helped revive buyer demand, persistent housing shortages and limited new construction continue to support price growth, according to the latest data from Eurostat and market analysts.
Across the European Union, residential property prices increased 5.1% year-on-year in the first quarter, while average rents rose 3.0%, both exceeding the EU’s annual inflation rate of 2.3%. However, the pace of growth varied considerably between countries, reflecting differing economic conditions, housing supply and financing environments.
Southern and Central European markets recorded the strongest gains. Portugal led the EU with annual house price growth of 17.8%, followed by Bulgaria (14.8%), Slovakia (14.4%) and Croatia (14.3%). Spain also continued its strong recovery, with residential prices increasing 12.8%, making it one of Europe’s fastest-growing housing markets.
Several other Central and Eastern European countries also posted double-digit growth. Residential prices increased 11.9% in Lithuania, 11.2% in Hungary, 10.9% in Latvia and 10.1% in Czechia, highlighting the continued resilience of the region’s housing markets. More moderate increases were recorded in Romania (7.8%), Ireland (6.8%), Poland (6.0%) and the Netherlands (5.2%).
By contrast, Europe’s largest mature housing markets continued to recover more slowly. Residential prices increased by only 1.4% in Germany and 0.1% in France, while Finland remained the only country to record an annual decline, with prices falling 2.0%.
The differences partly reflect varying stages of the market cycle following the rapid interest-rate increases of recent years. Markets such as Spain, Portugal and several Central European countries have benefited from stronger domestic demand, improving mortgage conditions and constrained housing supply, whereas Germany and France continue to experience a more gradual recovery after a prolonged slowdown.
Rental markets also continued to tighten across Europe, although growth was generally less pronounced than for house prices. The most notable exception was Croatia, where average rents increased 39.1% compared with the first quarter of 2025, by far the strongest rise recorded in Europe. Analysts attribute the sharp increase to a combination of limited long-term rental supply, strong tourism activity, population movements towards coastal cities and rising operating costs.
Outside Croatia, rental growth remained comparatively moderate. Bulgaria recorded the second-highest increase at 10.5%, followed by Iceland and Romania, where rents rose 8.4%, while Greece posted growth of 8.1%. Rental markets also remained relatively strong in Latvia (6.7%), Czechia (6.2%), Slovakia (5.7%) and Portugal (5.1%).
Among Europe’s four largest economies, Italy recorded rental growth of 3.8%, exceeding the EU average, while increases were more subdued in Spain (2.5%), Germany (2.2%) and France (1.9%).
Although inflation has moderated significantly over the past year, housing affordability remains under pressure. According to Eurostat, households across the European Union devoted an average of 18.9% of their disposable income to housing costs in 2025, with considerably higher shares recorded in several countries where accommodation costs account for more than 30% of household income.
Housing supply continues to be one of the principal challenges across Europe. Developers and policymakers face ongoing shortages of construction labour, elevated building costs and lengthy planning procedures, all of which continue to limit the delivery of new homes. These structural constraints have supported both property values and rental levels despite softer inflation and a gradual easing of financing costs.
Compared with the final quarter of 2025, EU house prices increased a further 1.2% during the first three months of 2026, while rents rose 0.7%, suggesting that momentum has continued into the current year. For investors and developers, the latest figures indicate that Europe’s residential market is entering a new phase in which regional fundamentals, rather than broader macroeconomic conditions alone, are increasingly shaping performance.
Source: CIJ.World Research & Analysis Team
