The real estate crisis deepens in Europe

With the impact of rising construction costs across the European Union, the rate of new home construction is declining, rental prices are rising and there is a decline in the number of potential buyers planning to purchase a home.

Rising rent, energy and food costs force people, especially young people, to adapt to living conditions.

Across the 27 EU member states, more than a quarter of Europeans aged 15 to 29 will live in overcrowded places by 2022. In Ireland, 30 percent of 18 to 24 year olds reported living with their parents in 2022, while this rate increased by almost 10 percent in five years.

According to an annual Deloitte study published in August; In Paris, where the rental housing market revived in September as students returned from summer holidays, rents reached 28.50 euros per square meter and the city became the second most expensive city in the EU after Dublin.

SALES DECREASE, PRICES INCREASE

But young European tenants weren’t the only ones feeling the pressure.

While rents reached record levels in Paris, Berlin and Lisbon, mortgage interest rates also rose across the region, increasing costs for homeowners using variable rate mortgage loans.

Due to the impact of rising costs, real estate sales in the Paris region fell by 23 percent in the second quarter of 2023. The fact that many potential buyers will not be able to own a home creates additional pressure on the market for rent.

According to Housing Europe, which works with groups offering public, cooperative and social housing in EU countries, average rents in the EU have increased by 19 percent and house prices by 47 percent in the decade to 2022.

THE NUMBER OF HOMELESS PEOPLE INCREASED BY 30 PERCENT

Ruth Owen, deputy director of FEANTSA, said that every night in the EU, approximately 900 thousand people remain on the streets or in homeless shelters. According to FEANTSA figures, the number of homeless people in the EU has increased by 30 percent since 2019.

According to a study carried out by Weil, Gotshal & Manges, a global legal consultancy, the real estate sector will be the most problematic in Europe in 2023.

The shortage of affordable housing is likely to drive up prices and worsen the situation for those who can barely afford housing.

STRONG DECLINE IN HOUSING CONSTRUCTION

As demand for housing fell, so did housing construction in the eurozone.

After rising interest rates and high inflation hit construction activities, there was the fastest drop in housing construction since April 2020.

According to a 2023 report by the IFO Institute in Munich, this problem has reached especially serious levels in Germany. The organization expects a 32 percent decline in new housing construction in Germany between 2023 and 2025.

In the 19 European countries included in the research, the number of housing constructions expected to be completed in 2025 decreased by 14 percent compared to 2022, falling to approximately 1.58 million.