Rent growth dips slightly in European cities but support for a cap increases

After continuous, and sometimes steep, increases in residential rents in major European cities over the past few years, prices now seem to have plateaued and are levelling out, the latest research shows.

There is a shortage of homes to rent in many countries and several cities are considering rent caps, according to the international rent index from HousingAnywhere which analyses data from over 88,417 listings of rooms in shared living accommodation in Barcelona, Berlin, Brussels, Madrid, Milan, Rotterdam, and Vienna.

‘We already caught a glimpse of rental prices reaching a ceiling in the past quarter, but now the trend has been substantiated. Tenants are simply not willing or able to pay higher rents, even though the scarcity on the housing market remains as concerning as it was a year ago,’ said Djordy Seelmann, chief executive officer of HousingAnywhere.

While all markets saw rental prices increase again in the second quarter of 2019, the rise was considerably less steep than in previous quarters. Across all the cities indexed for rental prices, Barcelona has shown the biggest overall increase year on year.

Prices for apartments have risen by 10.07%, studios by 7.17%, and private rooms by 0.76%. Prices are levelling out however, as a ceiling seems to have been reached: solely looking at the past quarter, Barcelona is among the cities showing a small overall increase.

‘A ceiling is being approached, but this slowdown is not caused by a rise in the number of apartments, studios, and rooms on offer. There is still an urgent need for solutions that increase the number of apartments and rooms, to solve the European-wide problem of housing for young professionals and students,’ said Seelmann.

In Rotterdam rents increased across the board year on year by 3.27% for apartments, 7.31% for studios and 6.50% for private rooms. With an average rent of €1287 per month, Rotterdam is the most expensive city in the HousingAnywhere index.

Brussels remains one of the cheapest cities to rent in, but compared to 2018, apartment rents have increased by 2.93%, studio prices by 8.99% and private rooms by 5.59%. The wide availability of housing, and the flexible attitude of the municipality regarding project development and building transformation, ensures a healthy rental market, for both tenants and landlords, the index report says.

After Berlin decided to introduce a rent cap, the demand for such a measure has increased in other European cities. In the Netherlands, the option is currently being considered by the House of Representatives and widely supported for middle segment rents.

But Seelmann pointed out that although a rental freeze could stop rents from increasing further, it is not an overall solution in terms of supply and it could make it less attractive for project developers and investors to build new houses and apartments.

‘If real estate developers earn less, the housing market becomes a less appealing investment option. We already see an effect on the number of real estate deals that are closed. According to the Europe Capital Trends report by Real Capital Analytics, the European average in real estate deals is down by 32%, its lowest point in six years,’ he pointed out.

‘Stimulating new construction remains the best solution to real estate scarcity. In the shorter term, the re-development and re-design of existing buildings can also offer some room for breathing. There is an urgent need for dialogue between the stakeholders, that is tenants, landlords, property investors, and politicians. Only then can a long term and sustainable solution for the housing market can be found,’ he added.