After attending Expo Real 2024 in Munich, one of the world's largest real estate events, it is clear that the residential sector is brimming with both opportunities and challenges. With more than 40,000 participants from 75 countries and over 1,700 exhibitors, the event provided a comprehensive look at the future of real estate, despite a complex global economic backdrop. At Living Impact, we came away energized by the evolving dynamics in housing affordability, healthcare real estate, and innovative investment opportunities. Here are the key insights:
European Residential Market: Stabilization and Growth
The residential real estate market in Europe is showing signs of stabilization, even as it faces significant macroeconomic headwinds. Following the severe corrections from interest rate hikes and inflationary pressures, the market is slowly regaining its footing. By mid-2024, the inflation-adjusted growth rate of real house prices across Europe was close to 0%, marking the end of a dramatic correction period. However, regional variations persist:
• Poland, Ireland, Norway, and the Netherlands saw real price increases exceeding 5% year-on-year.
• Germany, France, and Austria continue to face real declines of over 5%.
In the broader European context, mortgage interest rates, which had risen sharply, have now stabilized around 4.5%, offering some relief to prospective homeowners and investors. Meanwhile, the easing of credit conditions in countries like France and Italy has led to increased competition among lenders, further supporting the market’s recovery.
Growing Demand for Senior Living and Care Real Estate
One of the themes emerging from Expo Real 2024 is the growing demand for senior living and care real estate. As Europe’s population continues to age, there is an urgent need for purpose-built facilities to meet the increasing demand for specialized housing and care services. By 2030, more than 20% of Europe’s population is projected to be over 65, which underscores the necessity for senior housing developments.
The healthcare real estate sector is also experiencing growth as it provides essential services with long-term, stable income streams. Investors are drawn to the resilience of this sector, and at Living Impact, we are actively expanding our portfolio to address this growing need, particularly in Norway. We believe that investing in healthcare real estate is crucial to meeting future demand while offering solid returns.
Housing Affordability and Urbanisation Trends
Housing affordability is a major issue on the continent. Across Europe, rental prices continue to climb, with key cities like Berlin and Paris seeing annual rent increases of over 5%. Nordic cities are no exception with rental prices in Oslo increasing over 7.7% year to date. The cost of housing has become an acute issue for middle-income families, driven by high demand and a slow pace of new construction. Regulatory constraints, particularly around rental controls, have further exacerbated supply shortages in many regions.
At Living Impact, our shared ownership model is specifically designed to address this affordability issue. By allowing homeowners to purchase a share of a property while renting the remaining portion, we provide an affordable path to homeownership in markets where traditional housing options are becoming increasingly out of reach. This innovative solution has been well-received in Norway and other European markets.
Urbanization and economic growth are fueling housing demand, but this demand is becoming concentrated in specific regions. From 2023 to 2033, only a third of European regions are expected to see significant household growth, with cities like London, Munich, and Dublin projected to experience some of the fastest growth, exceeding 10% in household numbers. In contrast, over 30% of regions will see declines in households, further concentrating population growth in these thriving urban hubs.
In Norway, Oslo stands out as one of the fastest-growing cities in Europe, with significant population growth driving strong housing demand. Despite this, housing construction across Europe, including Norway, is not keeping pace with demand, leading to persistent supply shortages, particularly in these high-demand urban centers. This shortfall highlights the urgent need for increased residential construction to meet the needs of these rapidly growing cities.
Norway’s Real Estate Market Outlook
While Norway wasn’t a primary focus of Expo Real, it remains central to Living Impact's strategy. Norway’s real estate market has been one of the strongest performers in Europe in 2024, with house prices rising by 7.6% year-to-date. This growth is largely driven by demand in urban centers such as Oslo, where house prices have increased by 3.7% year-on-year.
Sales volumes in Norway are still reaching record levels, with over 10,000 homes sold in August 2024, representing an 8.6% increase compared to the same period in 2023. This is still only driven by sales in the secondary market, while the off-plan market is at a standstill. Housing construction starts have not been lower than 1946 and we expect a housing crisis in the coming years with dramatic price pressures in the capital. With an estimated shortage of over 40,000 homes in the country, and accumulating, the pressure on the market is expected to persist in the coming years.
Stabilizing Investment Markets: Yields and Transactions
Following two years of significant declines, the European residential investment market is showing signs of recovery. In Q2 2024, total transaction volumes reached €175 billion, although this is still 33% below 2023 levels. Multifamily housing remains the dominant sector, accounting for 65% of total investment volumes, while sectors like Purpose-Built Student Accommodation (PBSA) and senior living are gaining momentum.
Yields across Europe have begun to stabilize after a prolonged period of compression. The average prime residential yield shifted by just 4 basis points in the first half of 2024, signaling that the market is reaching a turning point. Norway continues to attract strong investor interest, particularly in the healthcare real estate sector, as investors seek out assets with stable, long-term returns.
Looking Ahead: The Future of Residential Real Estate
Expo Real 2024 reinforced the importance of innovation and adaptability in the residential market. As Europe navigates the post-COVID recovery, investors are increasingly focusing on long-term, stable asset classes like healthcare real estate, senior living, and shared ownership models. At Living Impact, we are at the forefront of these trends, providing innovative housing solutions that meet the needs of today’s market while creating lasting social impact.
Sources: Expo Real, Eurostat, ECB, Statistics Norway, Real Estate Norway
