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European Housing Market Challenges: Escalating Prices and Strategic Implications

by THEFUTURE.TEAM
October 21, 2025

Rising Prices Across the European Union

The European Commission’s recent report, “Housing in the European Union: Market Developments, Underlying Drivers, and Policies,” underscores that the issues of housing scarcity and escalating property prices extend far beyond Cyprus. The report reveals a dramatic surge in home prices throughout the EU over the past decade, largely outpacing income growth. In certain markets—Portugal being a prime example—properties have become substantially overvalued, highlighting the severity of the housing predicament across the continent.

Demand Dynamics and Supply Constraints

The report attributes the housing demand to several interlinked factors: rising incomes, increased wealth, shifting demographics, and the evolving terms of mortgage lending. Wealthier households and investors are increasingly dominating market activity. On the supply side, regulatory hurdles and a dearth of skilled labor have slowed the pace of new construction, with refurbishment projects often prioritized over new builds. This imbalance continues to strain the housing market, as further evidenced in countries like Portugal, Croatia, Spain, and Greece where construction permits are at or near historic lows.

Lending Capacity and Economic Pressures

Technocrats within the report indicate that household borrowing capacity has been significantly impacted by the hike in interest rates. In 12 member states, this capacity in 2024 is lower than it was in 2019, reflecting the harsh economic realities of tighter credit. In contrast, the remaining 15 countries have seen an improvement due to income gains, although interest rates remain in a contractionary posture compared to pre-tightening levels. This divergence illustrates the varied economic resilience across the EU.

Regulatory Bottlenecks and Taxation Policies

Excessive bureaucracy continues to hamper the issuance of construction permits, dampening the expansion of available public housing stock. While most EU countries enforce periodic property taxation, six nations—including Cyprus—do not, adding another layer of complexity to the market’s regulatory environment. Clear timeframes for permit approvals range dramatically—from as short as three weeks in Lithuania to an extended 31 weeks in Portugal, with several countries lacking a defined period altogether.

The Challenge of Vacant Properties

Adding to the multifaceted housing crisis, the report highlights that nearly one in six properties across the EU remains vacant. This issue is particularly acute in nations such as Bulgaria, Romania, Portugal, Malta, Cyprus, and Hungary, representing a significant challenge that necessitates strategic policy interventions.

Overall, the Commission’s analysis paints a picture of a market in flux, where rapid price increases and constrained supply are forcing stakeholders to rethink housing policies and investment strategies. The findings serve as a critical reminder for European leaders and investors to address these systemic issues with innovative, market-forward solutions.

European Central Bank Report Highlights Stable Inflation and Economic Outlook

by THEFUTURE.TEAM
October 29, 2025

Overview Of Inflation Trends

The latest European Central Bank survey shows a slight decline in median inflation expectations over the next 12 months, decreasing from 2.8% in August to 2.7% in September. Despite this minor adjustment, consumer perceptions of past 12-month inflation have held steady at 3.1% for the eighth consecutive month. Long-term projections for three- and five-year inflation remain stable at 2.5% and 2.2% respectively.

Consumer Expectations Drive Income And Spending Projections

Across the board, expectations for nominal income growth over the upcoming year have remained consistent at 1.1%. However, there is a noticeable shift in spending behavior: while perceived nominal spending growth for the past year slipped slightly to 4.9% from 5.0%, expectations for spending growth over the next 12 months rose to 3.5%. Notably, lower income groups continue to forecast marginally higher spending increases compared to their higher income counterparts.

Stability In Economic And Labour Market Outlook

Economic growth expectations are modestly pessimistic, with respondents forecasting a contraction of -1.2% over the next 12 months. Concurrently, anticipated unemployment levels remain unchanged at 10.7% a year ahead, though the outlook varies by income, with lower income households expecting unemployment rates as high as 12.7%, while higher income groups maintain expectations around 9.4%. Overall, the slight difference between current and future unemployment suggests a broadly stable labor market outlook.

Housing Market And Credit Conditions

The survey also reveals an upswing in expectations related to the housing market. Home price growth expectations have edged higher to 3.5%, and anticipated mortgage interest rates have risen modestly to 4.6%. Similar to other metrics, expectations vary by income, with lower income households expecting higher mortgage rates. In recent months, a marginal decline in reported credit tightening over the past 12 months contrasts with a renewed forecast of tighter credit conditions in the forthcoming year.

Conclusion

The ECB’s latest findings underscore the delicate balance between stable long-term economic forecasts and short-term adjustments in consumer expectations. The slight dips in inflation expectations, alongside stable perceptions of past inflation, delineate a marketplace that is both cautious and measured. As income, spending, and housing market metrics continue to evolve, these indicators provide critical insights for policymakers and investors navigating an increasingly complex economic landscape.

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