European residential: the great acceleration

Residential: at the heart of diversification strategies

The Covid-19 pandemic has reshuffled the cards in European residential markets, simultaneously triggering disruption whilst strengthening pre-crisis trends in the use of our living spaces. From working from home to urban flight, the times were ripe for a renewal of the European residential market.

Etude immobilier de résidentiel SCPI Primfamily

In the on-going reorganisation of work, homes must allow workers to work from home by ensuring appropriate peace and quiet.

As time spent at home has increased, expectations of housing have also changed, with two main themes emerging: residents’ health and wellbeing.This new landscape has resulted in households changing their behaviours around housing.

Primarily the preserve of high-income households, second or semi-principal residences remain a niche market. This type of housing is currently seeing a degree of success, particularly amongst those who suffered during lockdowns (limited space, lack of garden or terrace in major cities). This led to a surge in prices in holiday regions, with the arrival of managerial level buyers able to work from home several days per week and with considerable purchasing power.

Similarly, regional markets for semi-principal residences offer real buying opportunities for renting households who can not afford to buy in major cities. This said, with a return to a more normal life, mixing office and home working, everyday concerns will return to the fore. Thus, in recent opinion surveys, households wanting to move out of the city centre to gain living space (more square metres, terrace, garden etc.) are paying attention to their commuting times. Under these circumstances, households are mainly selecting inner and outer suburbs, whilst making sure that their commute does not exceed 45 minutes. As a result, cities with good public transport coverage of their urban area will be favoured, and particularly those where new underground and tram lines are being constructed.

Meanwhile, cities in advanced economies will remain the central lynchpin of modern economies, due to the employment they generate, the growth in wealth that they produce and the concentration of services that they offer their inhabitants (public services, transport hubs, and their offerings in culture, education and real estate). Lastly, the lack of economic dynamism, weak infrastructure coverage and poor connectivity of some cities will limit their attractiveness. What we are seeing, therefore, is a reorganisation within major urban centres rather than the urban exodus that might have been expected.

The purpose of this report is to aid understanding of the issues in residential investment in the current climate, whilst noting the fundamentals that persist despite the crisis, and to identify sources of future growth in specific markets. It has 3 parts:

  • 1. Domination of urbanisation post-Covid;
  • 2. Towards a complex residential sector: the emerging models;
  • 3. The institutionalisation of housing.

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The team

Daniel While
Henry-Aurélien Natter Head of Research