A “new consensus” in the coming months on European residential markets?

Investments in Europe
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“It will take several more months before a broad market consensus emerges on lower valuation levels around which investors can rally, allowing trading volumes and liquidity to recover. » This promise is signed Thomas BeyerléHead of Research at Catella Group, following the publication of the Catella Residential Markets Overview study, which analyzes trends in the European residential market in 63 cities in 20 countries. “Soaring bond yields, which offer investors solid returns and a less risky alternative to real estate, should also help cap residential valuations. »

Among the conclusions of this study:

• The average residential rent (all years of construction combined) in the 63 European cities studied is currently €17.25/m² per month, i.e. 2.5% more than in the third quarter of 2022. The lowest rents are found in Liège in Belgium with €9.50/m², followed by Brno in the Czech Republic with an average of €10.00/m².
• Rents are highest in London, with an average of €33.10/m². The British capital thus overtakes Geneva, in Switzerland, which occupies second place with 31.00 €/m². Luxembourg follows in third position with 30.00 €/m².
• The average purchase price of a condominium apartment in Europe (all years of construction combined) in the 1st quarter of 2023 is €5,235/m². The range goes from €1,720/m² in Lahti to €15,250/m² in Geneva.
• The average return for apartment buildings in Europe is 3.97%, an increase of 37 basis points compared to Q3 2022.
• The lowest yield of all European residential markets is found in Stockholm at 1.75% (+40bps in Q3 2022), followed by Zurich at 2.00% (+60bps in Q3 2022).
• The most attractive prime yields are in the Baltic cities of Vilnius at 5.50% (+10 basis points compared to Q3 2022) and Riga at 5.40% (+5 basis points), as well as in the Polish cities of Krakow at 5.40% (+15 basis points) and Wroclaw also at 5.40% (+15 basis points).

“Tougher financing conditions are leading to a sharp drop in new building permits and the supply of apartments will therefore decrease significantly in the coming months”, remarks Lars Vandrei, Senior Research Manager at CRIM. “At the same time, demand remains at a high level, driving up rents and occupancy rates. The social aspects of affordable rent will therefore continue to take center stage in the media and political arenas across Europe. We expect yields to stabilize in the second half of the year. »