European Housing Prices Rise Against the Trend: Divergence and Resilience Behind the Eurozone's 3% Real Growth

European House Prices Rise Against the Trend: Divergence and Resilience Behind the Euro Area's 3% Real Price Growth

According to the Bank for International Settlements (BIS) residential property price statistics for the third quarter of 2025, global real house prices (adjusted for consumer prices) fell by 0.7% year-on-year, continuing the downward trend since 2022, though the decline narrowed slightly from 0.8% in the previous quarter. Beneath the seemingly calm global data, regional divergence was exceptionally pronounced: real house prices in the euro area rose against the trend with a 3% year-on-year growth rate, emerging Europe recorded a strong 3.9% increase, while some economies in Asia and North America continued to decline. This pattern not only reflects deep shifts in global capital flows but also reveals the unique resilience of European economies amid inflationary pressures and monetary policy tightening.

I. Global Picture: Real House Price Correction Slows, Gap Between Advanced and Emerging Markets Narrows

The BIS quarterly statistics cover the world's major economies, and its aggregate data show that although nominal house prices continued to grow modestly at 2.0%, real purchasing power continues to be eroded. Advanced economies (AEs) as a whole saw real house prices almost flat (+0.3%), while emerging market economies (EMEs) fell by 1.5%, weighed down mainly by Asia (-3.3%). Notably, the growth gap between advanced and emerging markets has narrowed significantly from its 2022 peak, reflecting both the deep correction in emerging markets, especially China's property market, and the solid performance of some European and Latin American countries.

At the country level, about 60% of advanced economies reported price increases, while the share in emerging markets reached 70%. The top three gainers all came from Europe—North Macedonia (+20%), Hungary (+16%), and Portugal (+15%)—while the biggest decliners were China (-5%), Canada (-5%), and Finland (-4%). This pattern of Europe leading gains while North America and East Asia lead declines points to a structural realignment of global real estate markets.

II. Inside the Euro Area: Southern Europe Leads, Germany and France Moderate, Finland Declines

The euro area's overall real house prices have maintained year-on-year growth of around 3% for several consecutive quarters, making it a bright spot in the global property market. However, internal differences far exceed outside perceptions.

Portugal and Spain led with gains of 15% and 10%, respectively, reflecting the strong momentum of Southern European economies driven by the post-pandemic tourism recovery, digital industry relocation, and an influx of foreign direct investment (FDI). These two countries have long struggled with high unemployment and debt problems, but recent structural reforms and the injection of the EU Recovery Fund (NextGenerationEU) have significantly boosted market confidence. In contrast, the moderate growth of Italy (+2%) and Germany (+1%) is more in line with market expectations. Germany, as Europe's largest economy, has seen its house prices enter a plateau after overheating in previous years, while being constrained by high interest rates and rising construction costs. France's house prices edged down 0.2%, almost stable, reflecting the tug-of-war between weak demand and oversupply in core cities such as Paris.Notably, Finland (-2%), a Nordic country, has seen its house prices fall continuously, possibly related to high interest rates, demographic changes, and weak regional economic transformation. Although other Nordic countries such as Sweden and Norway are not listed separately in this report, historical data show that they also face similar pressures. This divergence within the euro area reminds us that there is no uniform real-estate cycle within a single-currency zone; differences in fiscal policies, labor-market flexibility, and industrial structures across countries determine the variation in house-price trends.

III. The Rise of Emerging Europe: Remarkable Gains in Hungary and North Macedonia

Emerging Europe as a whole saw real housing prices rise by 3.9% year-on-year, with Hungary (+16%) and North Macedonia (+20%) far exceeding the regional average. These two countries are not traditional investment hotspots, but their growth drivers are worth pondering.

In recent years, Hungary has relied on EU structural funds and investment in the automotive and battery industries, achieving one of the fastest economic growth rates in the EU. Housing demand in cities such as Budapest has been underpinned by rising domestic incomes and employees of foreign-funded enterprises. North Macedonia, for its part, has benefited from infrastructure improvements and the relocation of low-cost manufacturing, as well as the optimistic expectations generated by progress in EU accession talks, attracting buyers from neighboring countries. In addition, neighboring countries such as Bulgaria and Romania have maintained moderate but steady upward momentum—although not listed separately in the current data, regional composite indicators suggest that this trend is widespread.

Compared with the deep downturn in Asian emerging markets (especially China), the dynamism of Emerging Europe reflects the spillover effects of EU enlargement and the opportunities arising from supply-chain restructuring. As Europe advances "strategic autonomy" and nearshoring, Central and Eastern European countries are becoming new manufacturing and logistics hubs, thereby driving local housing demand and investment value.

IV. Policy and Outlook: Can Housing Market Resilience Last?

The relative resilience of the European housing market is not accidental. After the European Central Bank (ECB) aggressively hiked interest rates in 2022–2024, it entered a rate-cutting cycle in 2025, lowering real borrowing costs and providing support for homebuyers. At the same time, the gradual decline in inflation has brought the "nominal growth" of actual housing prices back into prominence. However, policy divergence remains significant: Germany and France face stricter credit standards and land-supply restrictions, while Southern European countries benefit from tourism and foreign property purchases (such as "golden visa" schemes, although some countries have tightened them).

In the long run, the European housing market faces three major structural challenges: first, population aging (especially in Southern and Eastern Europe) is a long-term drag on housing demand; second, the cost of building energy-efficiency upgrades brought by the green transition may push up house prices and intensify affordability pressures; third, the contradiction between chronically insufficient housing supply and excessively high urban housing prices. At the EU level, policymakers are trying to balance investment and people's livelihoods through the Energy Performance of Buildings Directive and the "Affordable Housing Plan", but implementation still depends on the fiscal space of individual countries.For businesses, the divergence in real estate prices means investment decisions need to be more refined. Industrial real estate and logistics warehousing projects in Southern and Central-Eastern Europe may benefit from regional growth, while office markets in Northwestern Europe face the dual challenges of remote work and rising interest rates. Financial institutions should pay attention to the geographic concentration risk of mortgage assets, especially in declining markets such as Finland.

Conclusion: The surprising resilience of European housing prices reflects the deep logic of economic transformation

The latest BIS data reveals a core fact: the global real estate market adjustment has not ended, but Europe as a whole, after experiencing a round of high inflation and monetary tightening, has not seen a major crash in real housing prices; instead, it has maintained strong momentum in some regions. This resilience stems not only from the diversity of Europe's economic structure, but also reflects the effectiveness of EU policy intervention and the eastward enlargement strategy. However, internal divergence continues to widen, and gaps between regions may further exacerbate social inequality and capital misallocation.

In the future, the European real estate market will be more constrained by long-term factors such as demographics, productivity, and climate policy, rather than simple monetary easing cycles. Entrepreneurs and policymakers need to look beyond short-term narratives of housing price rises and falls, and focus on the economic competitiveness and sustainable development logic behind housing assets.