Europe’s battered real estate sector is beginning to regain momentum after two years of high borrowing costs and weak investor sentiment, with analysts pointing to improving liquidity, stabilising interest rates and renewed demand in key markets.
Property consultancies including JLL and PwC say 2026 could mark the start of a new investment cycle across European commercial and residential property markets.
In Germany, Europe’s largest property market, commercial real estate activity has started to recover following a prolonged slowdown triggered by rising financing costs and pressure on office valuations. Analysts at Cushman & Wakefield reported stronger investment activity in late 2025 and early 2026, particularly in logistics and residential assets.
At the same time, Europe’s housing affordability crisis continues to intensify. Across the European Union, house prices have risen sharply over the past decade, while rents continue climbing in major cities including Amsterdam, Madrid and Lisbon.
In the United Kingdom, housing shortages and affordability pressures remain central political issues ahead of upcoming elections. Property auctions and distressed home sales are increasingly drawing attention as buyers search for cheaper alternatives in an expensive market.
Meanwhile, investors are shifting focus toward sectors considered more resilient to economic uncertainty, including logistics warehouses, student housing, data centres and premium residential developments. Office assets remain under pressure in several European capitals due to hybrid working trends, although prime properties in cities such as Paris and London continue attracting institutional capital.
Despite ongoing geopolitical risks and refinancing challenges, market participants believe Europe’s property sector may have passed its weakest phase. Lower inflation and expectations of future rate cuts are improving confidence, raising hopes that transaction volumes and valuations could strengthen further through 2026.
