European rental prices have increased by a staggering 16.5% over the past year and a quarterly increase of 3.5% during what used to be the typical rental peak season, according to the latest HousingAnywhere International Rent Index report.
While in the previous quarter, the revival of international mobility was considered the main driver for rising rental prices, this quarter rising energy costs and a soaring annual inflation of 9.1% are putting pressure on rental prices.
‘The unprecedented energy bills, the rising costs of living, and the ongoing rental price increases are challenging household budgets,’ said Djordy Seelmann, CEO of HousingAnywhere. ‘Governments are taking measures, such as capping energy prices and subsidizing energy bills. The question is whether this will distract policymakers from solving the structural lack of housing supply that affects rental prices across many European markets. To address the current challenges in a sustainable manner, the key stakeholders in the housing ecosystem need to seek a collaborative approach and stay focused on making accommodation available and accessible to achieve affordability, during these economically challenging times — even if it may be tempting to lean back, while popular short-term fixes are trending.’
On average, prices have increased by a moderate 1-6% quarter-on-quarter (QoQ) for all accommodation types (3.4% for private rooms, 6.1% for studios, and 1.1% for apartments). Although the QoQ increases may appear low, a closer look at the QoQ developments per accommodation type and city reveals huge variation.
The following cities show an above-average QoQ increase in both apartment and studio prices: Amsterdam (by 18.3% and 17.5%), Lisbon (by 10% and 35.8%), and Athens (by 14.3% and 15.8%). However, in some cities, the apartment and studio prices have also been decreasing QoQ. Notable examples include Helsinki (by -6.5% and -19.8%), Brussels (by -4.4% and -3.2%), and Paris (by -5.6% and -6.6%).
The relative increase in private room prices across Europe may partly indicate that private rooms have become more popular again after a consistent decrease in prices during and in the immediate aftermath of Covid-19. Furthermore, less availability of affordable apartments and studios may have urged people to switch to private rooms. The increase in demand that results from this shift could partially explain why we have seen rental prices in the private-room segment rise.
The European housing crisis is no longer solely caused by supply shortages but exacerbated by current events in the world. The ongoing Ukraine-Russia war caused a severe energy crisis. Persistent inflation and rising interest rates are now also starting to have a real effect on real-estate prices.
Not only is renting becoming increasingly expensive. Buying a home has been out of reach for especially the younger generation for years: since 2010 the cost of buying a home has increased by an average of 45% across Europe. Rising interest rates and halting real-estate developments have made home ownership more expensive than ever. While governments are stepping in to shield consumers from rising energy costs, the measures do not provide a long-term solution to the housing crisis.
It is critical that all major stakeholders take responsibility and play their part in finding a solution to the ongoing European housing crisis. A major step towards solving the housing crisis has recently been taken by the Dutch government when it launched a student housing action plan aimed at providing 60,000 affordable student homes by 2030. The plan has broad support and was put together through collaboration with housing associations, private investors, local councils, and student organizations.
‘Even though this will not solve the nationwide housing crisis in the Netherlands, it will give universities and colleges more leeway in handling the influx of international students in the coming years,’ added Seelmann. “I hope this plan is picked up across the board and will serve as an example for other European countries.”