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Rents in European cities are rising but levelling off in some cities

Rents in European cities for studios, apartments and rooms are continuing to rise but the growth is beginning to slow, with levels down in the first quarter of 2019, the latest index shows.

Barcelona and Madrid have recorded the steepest climb in rental prices but overall in key capital cities rents seem to be reaching a ceiling, according to the European rent index from Housing Anywhere.

The report points out that the increase in rental prices follows a rising shortage in available rental properties, increasing competition among international students and young professionals to find proper housing, and a greater number of premium apartments being offered at higher prices.

All markets saw an upward trend in the first three months of 2019 for rents for single rooms, studios, and one bedroom apartments. The increase was most notable for one bedroom apartments in Barcelona, up 7.8%, and for studios in Madrid, up 7.79%.

Madrid and Barcelona currently still rank among the major European cities with the lowest overall rental prices but are catching up with sharp increases compared to other European cities over the past quarter.

Indeed, Barcelona recorded a significant increase in rents for one bedroom apartments over the past year. The average month went up from €1,111.61 in the first quarter of 2018, to €1,228.58 in the first quarter of 2019.

While the lettings market in Madrid appears to be stabilizing overall, studio rents increased by 7.79% to an average monthly rent of €818.23 while apartment rents increased by 2.31% to € 1,097.52.

Berlin has the third highest rises with rents or one bedroom apartments up by 6.91% over the past year, bringing the average price per month up to €1,096.38. Just as for Madrid and Barcelona, the first quarter of 2019 shows a steeper increase than the previous quarter, with an increase in rents for one bedroom apartments of 3.8%.

Across all of the cities tracked by the index, Brussels recorded the smallest overall increase. Prices for private rooms have displayed the steepest rise at 8.96%. The average rent for apartments rose to € 920.17, an increase of 2.03%.

The report says that in Brussels the high availability of housing and the flexible attitude of the municipality regarding project development and building transformation ensures a healthy rental market, both for tenants and landlords.

Milan is the most city for rentals overall. Rents for private rooms increased 4.63% over the past quarter, but overall rents appear to be approaching a plateau. Average rents in Milan reached € 1,137.05 for one bedroom apartments, an increase of 0.24% compared to last year.

But it is Rotterdam where apartment rents are highest, up 2.87% to an average rent of €1,262.27 per month. Private rooms, on the other hand, are relatively cheap, and prices have only risen by 0.25% in the last quarter, to € 530.53.

‘The Dutch rental market and Rotterdam specifically have delivered some great yields in the past couple of years and are expected to continue to do so, but the municipality has to seize opportunities in terms of rezoning, repurposing, and new construction to solve current housing shortages,’ the index report says.

It also shows that in Vienna studio rents increased by 8.66% over the last quarter pushing average monthly rental rates up to € 761.93 while the average for a one bedroom apartment is €911.35.

‘For the past couple of years, the city’s rental market has seen high demand from expats and international students coming to Vienna to study and work. It has also seen an increase in tourism, which is one of the reasons why the municipality is currently developing new legislation with regards to regulating the private short term rental of accommodations through Airbnb,’ it adds.

According to Djordy Seelman, chief executive officer of Housing Anywhere, although the average rental price has increased over the past year, the trend is starting to show a looming price ceiling.

‘We have not reached the top yet, but the increase in does seem to be slowing down. However, this slowdown is not caused by a rise in the number of apartments, studios, and rooms on offer, it is merely an indication that tenants are not able to pay more than the current market rents,’ he pointed out.

‘There is still an urgent need for solutions to increase the number of apartments and rooms on offer, and therefore solve the European-wide problem of housing for students and young professionals,’ he added.