Southern Europe leads the way in ERA rental forecasts

Many of Europe’s major rental markets will have to wait until 2026 before seeing a significant improvement in market conditions, although southern Europe, Poland and the Netherlands will continue to see modest to strong growth this year and next.

The forecasts were given by the European Rental Association’s consultant, KPMG, at the ERA’s annual convention in Dublin.

Germany’s rental market is expected to grow by 1% this year before recovering to 2.4% in 2026, said Antoine Onilon, manager, corporate strategy at KPMG France. France is forecast to expand by just 0.5% this year before seeing improving growth of 2.5% in 2026. A similar trend is forecast for the UK market, with growth of 1.5% this year followed by 3% in 2026.

The Nordic market will see contrasting conditions, said Seban. Finland is expected to recover strongly this year at 4% growth, with 4.2% forecast for 2026. Sweden and Norway, which both saw sharp declines in rental activity last year, are expected to experience very modest growth or stabilisation this year followed by 3.2% growth in Sweden next year and 3.7% in Norway.

Denmark has performed better than its Nordic neighbours in recent years and KPMG is forecasting 4% growth in rental this year followed by 4.7% in 2026.

More dynamic Southern Europe

Southern EU markets remain dynamic, said Seban, with Italy, Spain and Portugal all seeing growth rates of between 4.5% and 6.5% this year and all exceeding 7% growth in 2026. Portugal will lead the way with a forecast 8.7% expansion of rental activity next year.

The Netherlands and Poland occupy the middle ground in growth terms, with both forecast to see 3.5% rental growth this year followed by 3.7% and 4%, respectively, in 2026.

“What we can see is that 2025 is going to have the same dynamic as 2023 and 2024 with overall in the Eurozone a GDP growth that is going to be quite weak, under 1%”, said Seban, “And this can be explained overall by a general geopolitical and economic situation that is tough, with huge uncertainty.”

He said falling interest rates would have a positive impact; “We are not seeing the impact of this yet, but we expect to see a visible and positive impact for investment overall in Europe by the end of 2025 and mostly in 2026.

“A second positive impact is massive public investments. The European financing plan, which started in 2021 and should end by 2026. Overall, it’s a massive financing plan. We are talking about almost €800 billion that should be spent across Europe. And if we look at it in some countries, such as Spain, Portugal, or Italy, for instance, it will contribute to more than 10% of GDP.”

Seban said residential markets will be quite weak across most of the countries in Europe, but that the infrastructure sector would perform better; “We are seeing a lot of infrastructure projects that are being launched, based on the existing pipeline, but still we also have interesting new projects.”