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Published: 2026/01/25 23:31:29
European Housing Affordability Crisis deepens
The European housing market is facing a growing affordability crisis,with a important decline in the proportion of households able to purchase new homes. Rising construction costs,increasing interest rates,and stagnant wage growth are collectively squeezing potential buyers out of the market,a trend observed across the continent. This situation is prompting calls for policy interventions, such as adjustments to Value Added Tax (VAT) rates, to mitigate the impact.
Declining Affordability: A Continent-Wide Trend
Recent data indicates a substantial decrease in housing affordability since 2021. While the original source suggested a halving of households able to afford new homes between 2021 and early 2025, more recent analysis shows a more nuanced picture. According to Eurostat data released in December 2025, housing affordability has deteriorated significantly across the EU, with the percentage of households able to afford a new home falling by approximately 30-40% in many member states during that period. Eurostat.
By late 2025, only 2.9% of households coudl afford a new apartment, and 1.64% could afford a new house, according to calculations by Realo, a real estate data analytics firm. Realo. This represents a considerable drop from previous years and highlights the increasing difficulty for average households to enter the housing market.
Impact on Mortgage Lending
The decline in affordability is reflected in mortgage market activity. The National Bank of Belgium (BNB) reported that, through the first eleven months of 2025, only 11.6% of approved mortgages were for new construction projects. National Bank of Belgium. This shift indicates a decreased demand for new builds and a potential slowdown in the construction sector.
Factors Contributing to the crisis
Several factors are converging to create this affordability crisis:
- Rising Construction Costs: The cost of building materials and labor has increased significantly in recent years, driven by supply chain disruptions and inflation. Statista
- Increasing Interest Rates: Central banks across Europe have been raising interest rates to combat inflation, making mortgages more expensive. The European Central Bank (ECB) increased it’s key interest rates multiple times in 2023 and 2024, and maintained them at elevated levels throughout 2025. European central Bank
- Stagnant Wage Growth: wage growth has not kept pace with rising housing costs, further eroding affordability.
- Limited Housing Supply: In many European cities, a shortage of available housing exacerbates the problem, driving up prices.
Potential Solutions and Policy Responses
Analysts and policymakers are exploring various solutions to address the housing affordability crisis. One frequently discussed proposal is a
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