European housing price "temperature gap" widens: Southern and Central-Eastern Europe lead the rise, Northern Europe under pressure — Interpreting BIS Q3 2025 Data

According to the Bank for International Settlements (BIS) residential property price statistics for Q3 2025, global real house prices fell by 0.7% year-on-year, continuing the mild contraction since 2022. However, aggregate data masks clear regional divergences: Europe, especially southern euro area and emerging European countries, is showing growth momentum, while some markets in Asia and North America are still adjusting. This pattern is not only about the property market itself, but also reflects changes in global economic rebalancing and Europe's internal competitiveness.

Warning of divergence between global aggregates and medians

The report shows that after adjusting for consumer prices, global real house prices fell by 0.7% year-on-year, roughly flat compared with the previous quarter. Nominal house prices grew by 2.0% globally, but inflation eroded real purchasing power. More notably, regional aggregate data are heavily influenced by major economies. The BIS notes that although the aggregate declined, about 60% of advanced economies and 70% of emerging market economies covered by the report saw real house price increases, with a global median increase of 1.5%. This means that global house prices are not universally falling, but rather showing structural divergence.

Euro area: Southern Europe as the engine, Nordic countries showing weakness

Overall, real house prices in advanced economies grew by only 0.3% year-on-year, close to zero growth, but the euro area achieved 3% growth, in stark contrast to the UK, the US, Canada, and others. Within the euro area, Portugal and Spain led with gains of 15% and 10% respectively, showing that southern European countries, after the sovereign debt crisis, are once again becoming destinations for capital and talent inflows. Italy (+2%) and Germany (+1%) grew moderately, France (-0.2%) was roughly flat, while Finland (-2%) continued to decline, with the sluggish Nordic market becoming a major 'cold zone' within the euro area.

Looking at the long term, this divergence could exacerbate regional economic imbalances. The rapid growth in southern Europe on the one hand reflects economic recovery and a tourism boom, but on the other hand may also raise risks for housing affordability and financial stability. The stagnation in Germany and France, in turn, is linked to factors such as weaker investment demand under high interest rates and rising residential construction costs.

Emerging Europe: Unexpected bright spots in Central-Eastern and South-Eastern Europe

In the BIS classification, emerging Europe is an underappreciated segment. In Q3 2025, real house prices in the region rose 3.9% year-on-year, exceeding all major global regions. North Macedonia (+20%) and Hungary (+16%) even recorded the highest gains globally, while Turkey ended six consecutive quarters of decline, with only a slight drop of 1%. These data suggest that Central and Eastern Europe is undergoing a round of asset price revaluation, possibly driven by EU fund inflows, labor cost advantages, and large-scale housing renovation demand in some countries.

However, high growth also brings challenges. The market sizes of Hungary and North Macedonia are relatively small; rapid increases may attract speculative capital, raise the threshold for local residents to buy homes, and create new macroeconomic vulnerabilities.

Other global regions: Asia contracts, North America adjusts Emerging Asian markets saw real house prices fall 3.3%, with China (-5%) and Indonesia (-2%) being the main drags. India and the Philippines were broadly flat, showing divergence within the region. Latin America rose 2%, mainly boosted by Mexico (+5%), while Brazil edged down. Among advanced economies, Canada (-5%) and the United States (-2%) continued to adjust, while the United Kingdom (-1%) and South Korea (-2%) were also on a downward path. By contrast, Australia (+2%) and Japan (+1%) maintained modest positive growth.

This global picture suggests that the post-pandemic property cycle is entering a "rebalancing" phase. Markets that previously rose too quickly or were excessively leveraged are undergoing price corrections, while previously lagging peripheral European regions are enjoying the benefits of capital inflows.

Implications for European Policy and Competitiveness

In this release, BIS also updated the classification of advanced and emerging market economies, with adjustments to statistical coverage. This technical change itself reflects the shift in global economic weight. For Europe, the current house price trends convey three key signals:

1. The euro area housing market is relatively resilient, but internal imbalances are intensifying. The divergence in house price growth between Southern and Northern Europe could further affect monetary policy transmission and banking risk distribution in the euro area. When setting interest rates, the European Central Bank needs to pay greater attention to the heterogeneity of housing markets across member states.

2. Emerging European countries may become beneficiaries of the EU's industrial chain restructuring. Rising property prices are often accompanied by the agglomeration of economic activity. The performance of countries such as North Macedonia and Hungary may herald a new trend of capital and industry moving within Europe toward Central and Eastern European and Southeast European countries, which has potential implications for the EU's "cohesion policy" and "strategic autonomy."

3. The divergence in global property cycles brings both opportunities and risks for investors. For institutions focused on the European market, the growth story in Portugal, Spain, and parts of Central and Eastern Europe may not yet be over, but valuation bubbles warrant caution; meanwhile, the adjustments in core markets such as Germany and France may offer a window for long-term positioning.

Overall, BIS's statistical release is not merely a stocktaking of house prices, but also an important window for observing global economic rebalancing. In Europe, the "temperature gap" in the housing market is widening. How to smoothly guide this process through policy tools will test the governance wisdom of the EU and its member states.