Real Estate: After a 25% Drop Over 4 Years in Europe, Signs of Recovery Confirmed

A European Recovery with Varying Dynamics

Catella has released the latest edition of its Catella House View study, highlighting that after four years of correction marked by an average 25% decline in values across Europe, the real estate sector is entering a new phase of growth in 2026. The stabilization of interest rates and improved financing are reshaping the investment landscape, with prime values rebounding by about 6% since the end of 2023. However, the recovery will be fragmented and demanding, according to the study, driven particularly by affordable housing and functional habitats, which have been identified as the most attractive segments in the European market.

Housing Shortage and Societal Changes

The European affordable housing deficit is estimated to reach nearly four million units by 2030, as rents have increased by an average of 6% per year over the past five years. Catella highlights a « lock-in » effect: rents for new leases are rising twice as fast as those for existing leases, resulting in tenants staying put and hindering economic dynamism. Europe will also need to accommodate two million additional beds for its seniors by 2050, which represents more than a 70% increase over current capacity.
In the French office market, the Central Business District accounts for 45% of investments despite overall volumes being below historical averages, while the vacancy rate has exceeded 6% for the first time since 1997. Rents for new or renovated office spaces have surged by 35% since 2020.

French housing market sees growth in the first quarter

The Laforêt network reports demand that is present but measured, with a national increase of 4%, and a notably growing supply, up by 9% over three months. Prices have remained mostly stable, with a slight increase of 0.5%, while selling times are lengthening, averaging 103 days. Demand is stronger for apartments, which have seen a 6% increase, compared to a decrease of 2% for houses. Currently, 8 out of 10 transactions involve negotiations, with an average reduction of 5.1%.