Housing shortage drives dramatic price increases in European Cities

09:35 25/5/2024 - Πηγή: iEfimerida

The scarcity of housing is fueling significant price hikes in some of Europe’s largest cities, with Madrid now leading the rankings with an almost 11 percent annual increase.

Athens follows close behind in second place, with property prices rising by 9.6 percent within a year. For the first time in 17 months, Athens has dipped below the 10 percent threshold.

The overall price surge in Greece

can be largely attributed to increased demand, gradually improved purchasing power among Greek consumers after the end of austerity measures and the COVID-19 health crisis, the search for better-quality homes, and the enduring trust of Greeks in real estate as a secure investment, according to a Remax study.

The study shows that foreign buyers are not limiting their purchases to tourist destinations or Athens and Thessaloniki. Instead, they are expanding their interest to other regions that previously did not show trong demand.

According to research by Spitogatos, areas near Athens often present a good choice for vacation homes due to easy and quick access for both residents of the capital and others. 

Despite historically high interest rates, residential properties continue to thrive in the Spanish capital, as reported by Bloomberg City Tracker. Local buyers desperately seeking homes and investors seeking returns are driving this growth.

Madrid has been significantly impacted by an influx of money from Latin America, exacerbating the market squeeze. Additionally, targeted advertising campaigns for specific neighborhoods have contributed to the city’s appeal. 

Carabanchel, traditionally a working-class area, was named the third “coolest” neighborhood globally last year.

New residential construction remains historically low, with minimal available urban land for development and few plans for new projects. Housing inventory has decreased by 11 percent in the past year, according to the Idealista real estate website.

With such limited supply, sales declined by 8 percent in the first quarter, according to the statistical agency. 

“An increasingly severe housing shortage is accumulating,” said Beatriz Toribio, head of the Spanish Developers and Builders Association. “Madrid is a crucial economic hub, and more people are coming to work and live in the city. Add to that the allure of tourism and culture, and you’ll understand why demand is rising.”

Ms. Toribio emphasized the need for more efforts to reduce bureaucracy and address labor shortages. She also urged the government to develop a long-term vision for housing.

Similar trends are observed in the Madrid province, where apartment prices increased by just over 7 percent, maintaining their momentum since October 2022.

Among the 12 European cities tracked, only three experienced price declines. Paris saw the largest decrease at -7.5 percent.

In Madrid, Elena Jori, director of real estate agency Home Select, noted that the supply-demand imbalance indicates that prices will likely continue to rise. She also highlighted the risk of a property bubble collapse.

“Today’s market bears no resemblance to the one that caused the 2008 crash,” she said. “There is neither an excess housing stock nor cheap financing. We’re precisely dealing with a supply shortage.”

by Vassilis Kaltsas

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