The European real estate sector has recently shown strong performance, reaching the top of the Stoxx-600 index. This positive momentum is particularly relevant for private investors and savers, as falling market interest rates increase the attractiveness of real estate investments.
Key Topics on Real Estate Values and Market Context
Strong Investment Activity in Germany
In the first quarter of 2025, the German real estate investment market recorded a transaction volume of 7.9 billion euros, representing a 26% increase compared to the previous year. This signals a regained confidence, particularly in office properties. This robust start reflects a broader wave of optimism, despite geopolitical and economic uncertainties.
Interest Rate Cuts by the European Central Bank
The ECB has gradually lowered interest rates since late 2024, most recently by 25 basis points in March 2025. These lower financing costs make mortgages more accessible for both national and international investors, fueling demand in various European markets, such as Italy.
Positive Trends Across Europe
The EU-15 real estate index, compiled by Union Investment, reached new highs at the beginning of 2025. This confirms the persistently strong trends in real estate values in key European countries. Italy also experienced widespread growth, driven by eased financing conditions amid still challenging inflationary circumstances.
Impacts on Private Investors and Savers
Falling market interest rates reduce the returns on traditional fixed-income products such as bonds or savings accounts. Consequently, many private investors find real estate increasingly attractive, as it offers potential for capital appreciation and income generation through rents. This shift is reflected in rising real estate prices across Europe.
In summary, declining market interest rates, driven by the ECB’s policies, have increased demand for European real estate values. This trend has resulted in heightened transaction volumes and higher real estate valuations in key markets such as Germany and Italy.