Housing in the European Union: Market Developments, Underlying Drivers, and Policies

This paper analyses recent developments in EU housing markets, identifies key supply and demand factors driving rising house prices and declining affordability, and evaluates the role of various policies influencing housing market outcomes.

Highlights:

• House prices in the EU have risen faster than incomes over the past decade and, together with the recent increase in mortgage rates, have reduced purchase affordability.
• Rents for existing contracts have grown more slowly than house prices, but rents for new contracts have surged, reducing rental affordability for newcomers.
• Housing demand is driven by income, wealth, demographics, and mortgage conditions. Additional demand pressures stem from urbanisation, migration, changing family structures, demand from institutional investors, and the expansion of short-term rentals.
• Housing supply lags behind due to regulatory barriers, rising construction and land costs, inefficiencies in the construction sector, and labour shortages.
• Policy options include supply-side reforms, adjustments in tax systems, balanced rental regulation, and increased investment in social and affordable housing.

Information and identifiers

Discussion Paper 228. October 2025. Brussels. PDF 88pp. Tab. Graph. Bibliogr. Free.

KC-01-25-063-EN-N  (online)  
ISBN 978-92-68-31835-5 (online)  
ISSN 2443-8022 (online) 
doi:10.2765/3521352  (online)

JEL classification: G51, R21, R31, R52, R5.

Disclaimer

European Economy Discussion Papers are written by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs, or by experts working in association with them, to inform discussion on economic policy and to stimulate debate. The views expressed in this document are solely those of the author(s) and do not necessarily represent the official views of the European Commission.