LONDON – European housing markets ended 2025 with a broad recovery that reached 17 of the continent’s 20 major economies, driven by falling mortgage costs after years of rate increases that had suppressed transaction volumes across the bloc. Slovenia led all markets with growth of 29.9 percent, Lithuania posted a 22.8 percent rise, and Austria climbed 21.4 percent, with Belgium, Luxembourg, and Hungary each recording double-digit gains.
The recovery’s engine was Euribor, the benchmark rate that determines variable mortgage costs for most European homebuyers. As the European Central Bank began cutting rates in 2024 and continued into 2025, the monthly cost of carrying a mortgage fell across the eurozone, unlocking demand that had been priced out of the market or had chosen to wait. Mikk Kalmet, a real estate advisor at Global Property Guide, told Euronews: “Residential property transactions are mainly influenced by mortgage affordability, interest rates, household incomes, employment, consumer confidence, and housing supply.” Of those factors, interest rates and affordability were the variables most in motion in 2025.
France’s recovery illustrates both the scale of the reversal and its limits. After a decline in 2024 that left the French market well below its historical transaction volumes, 2025 brought France back above one million residential sales, a symbolic threshold the market had not crossed in several years. The recovery was accompanied by only modest price growth, with French house prices rising 0.1 percent between the first quarter of 2025 and the first quarter of 2026, indicating that the increase in transactions reflected pent-up demand finding an exit rather than speculative pressure driving prices higher.
The European Central Bank’s rate decisions through 2025 and into 2026 were complicated by the Iran-US war, which drove energy inflation higher and forced the ECB to balance supporting housing recovery against managing persistent service-sector price increases. That tension limited the speed at which rate cuts arrived. The ECB raised rates once during the conflict period before resuming cuts, shaping the affordability environment in which European buyers were making purchasing decisions throughout the year.
Croatia’s fourth consecutive annual decline in home sales stands out against the broader continental trend. The country reported a 4.1 percent fall in 2025 transactions despite house prices rising 14.3 percent and rental costs climbing 39.1 percent. Croatia’s experience points to a structural divergence that the recovery data obscures: in markets where prices have risen sharply relative to incomes, driven in Croatia’s case by tourism-sector demand and foreign buyer interest, local purchasing power may not be sufficient to sustain transaction volumes regardless of what happens to mortgage rates. The gap between an international pricing reality and a domestic income reality has not been narrowing.
Slovenia’s 29.9 percent growth in transactions reflected a market where the combination of rate cuts, modest price levels relative to regional peers, and recovering consumer confidence aligned to produce an outsized rebound. The country’s 11,000 residential transactions in 2025 are a small absolute number compared to France’s one million, but the percentage growth rate was the sharpest in Europe and reflected a market that had compressed significantly during the high-rate period.
Eurozone inflation fell to 2.8 percent in June 2026, below analyst expectations and driven by retreating energy prices, removing the prospect of a July ECB rate increase. For housing markets, the direction of the September meeting matters: a further reduction would sustain and potentially accelerate the 2025 momentum, while a hold would test whether the recovery’s foundations extend beyond rate sensitivity.
High construction costs and limited new building activity continued to constrain housing supply across Europe through 2025, a structural factor that rate movements cannot address. In markets where transaction volumes recovered, the supply of available properties did not grow proportionally, which applied upward pressure to prices in the fastest-recovering markets without fully resolving the affordability problem that the rate increases of 2022-2024 created.
The Netherlands posted 13.9 percent growth, Denmark climbed 12.7 percent, and France’s 11.2 percent placed it in the middle of the European recovery. Portugal grew 10.5 percent, Latvia 9.2 percent, Finland 9 percent, and Norway 8.3 percent. Spain, despite the broader narrative of its housing market as increasingly inaccessible, posted 5.4 percent growth in transactions. The range of outcomes within the 17-country recovery reflects how differently rate cuts translate into purchasing activity depending on local income levels, housing supply conditions, and the starting price level of each market.
Bulgaria fell 2.5 percent and Poland declined 1.1 percent, joining Croatia as the three markets that contracted even as the broader continent recovered. Their persistence in declining while the broader market recovers indicates that local factors can override the monetary-policy tailwind that drove recovery elsewhere. What 2026’s data will show is whether some of the markets that rebounded sharply in 2025 encounter the same ceiling that limited French price growth to 0.1 percent even as transaction volumes recovered.
The 17-out-of-20 headline figure captures the breadth of the 2025 recovery. The underlying data suggests the depth is more variable, and the structural constraints on housing supply across the continent mean that recovering transaction volumes have not translated into broadly affordable markets. The question for 2026 is whether the ECB’s rate path sustains the momentum or whether the energy-driven inflation that complicated 2025’s cuts returns to narrow the affordability window that drove the recovery in the first place.
