We recently wrote about the rise in real estate prices worldwide, which in the last five years has hit the Middle East and Southeast Europe the hardest. Now the same is happening in the European market, where housing prices are growing much faster than citizens' incomes. A new report by the European Commission "Housing in the European Union: Market Developments, Underlying Factors and Policies" reveals that real estate prices in the EU have increased by as much as 50% from 2014 to 2024, while in some countries, such as Hungary, Lithuania, Czech Republic, Portugal, Estonia, Bulgaria and Poland, they have jumped by more than 200 percent.
Portugal as the most overvalued market in Europe
According to estimates by the European Commission, Portugal has the most overvalued real estate in the European Union. Prices there, according to market assessment models, are 35% higher than their actual value, which is the highest level recorded in Europe. The cause lies in a combination of factors: rising interest rates, strong demand from wealthier buyers, institutional investments, and the explosion of short-term rentals. Tourism and platforms like Airbnb have further limited the supply of apartments for long-term rent, which has led to pressure on prices.
Price growth and decline in housing affordability
When comparing price growth with income growth, it is clear that housing is becoming increasingly difficult to access. The largest increase in the price-to-income ratio was recorded in Portugal, the Netherlands, Hungary, Luxembourg, Ireland, the Czech Republic and Austria, where prices grew more than 20% faster than wages. This means that even in countries with a high standard, buying real estate is becoming an increasing challenge as the market moves further away from the real possibilities of the average citizen.
The impact of tourism and short-term rentals
The European Commission clearly links the rise in real estate prices to the development of tourism. In tourist countries, such as Portugal, Spain, Italy and Croatia, the increase in the number of short-term rentals directly reduces the availability of apartments for long-term rent. This especially applies to the historical centers of cities, where a large part of the real estate has been redirected to tourist accommodation. This trend, although it brings short-term profit, in the long term reduces the number of available apartments for the local population and increases pressure on prices.
Empty properties as untapped potential
One of the biggest paradoxes of the European market is empty properties. It is estimated that one in six properties in Europe is empty, and the countries with the largest share of empty apartments are Portugal, Bulgaria, Romania, Malta, Cyprus and Hungary. Such properties are often kept as an investment, without actual use, which reduces the supply of active apartments and further increases prices. This is a trend that is also becoming an important topic in Croatia, where there is more and more discussion about taxing empty apartments.
Croatia among countries with more moderate growth
In the European context, Croatia is ranked among the more stable markets. Real estate prices in our country are growing continuously, but not with the same intensity as in Portugal or Hungary. Despite the growth of tourist rentals and the increase in demand from foreign buyers, the domestic market still shows balanced trends. However, challenges such as slow permits, a shortage of new construction and a lack of housing policies may in the future further affect the affordability of housing, especially in Zagreb and on the coast.
Europe seeks a balance between tourism and housing sustainability
While the world is still analyzing the global rise in real estate prices, Europe is facing its own problems - growth that often surpasses real value and threatens housing affordability. Portugal is the most extreme example, but similar trends are increasingly followed by other countries in southern Europe, including Croatia. The key question that European markets must solve is how to reconcile tourism, investment and sustainable housing. Because, if real estate prices in the world are a matter of the market, in Europe they are increasingly a matter of social balance.
