Europe's Housing Divide: Double-Digit Price Rises in Portugal and Bulgaria, Falls in France and Finland

House prices continue to rise across much of Europe, but the pace varies dramatically from country to country. In the second quarter of 2026, Portugal recorded the highest annual increase at 16.5%, closely followed by Bulgaria at 15.5%, according to Eurostat data. Across the EU, prices rose by 4.7% compared with a year earlier, outpacing inflation of 3.2%.

Nine European countries recorded double-digit year-on-year increases. After Portugal and Bulgaria came Lithuania (14.3%), Slovakia (13.6%), Croatia (12.7%), Spain (12.1%), Romania (12.1%), Latvia (11.4%), and Hungary (10.2%). Denmark (9.4%), Slovenia (9.1%), and Czechia (8.6%) were close behind.

At the other end of the scale, only three countries saw prices decline. Finland recorded a fall of 2.7%, Luxembourg 2.2%, and France 0.8%. Among the EU's largest economies, Spain stood out with a 12.1% rise, while Italy (4%) came in below the EU average. Germany recorded only a slight increase of 0.6%.

Real estate expert Mikk Kalmet of Global Property Guide explained the divergence. In Portugal, strong housing demand continues to outstrip supply, particularly in Lisbon, Porto, and popular coastal areas. "Limited new construction, foreign investment, tourism-related demand and persistent housing shortages have all contributed to rising prices," he said. In Bulgaria, rising household incomes, wage growth, relatively affordable mortgage financing, and strong demand for property as an investment have supported price increases.

For Finland, Kalmet pointed to weak economic growth, subdued consumer confidence, and the lingering effects of higher interest rates. In France, affordability constraints, relatively weak housing demand, and the effects of previously elevated mortgage rates have put downward pressure on prices. Economic uncertainty has also encouraged some prospective buyers to postpone purchases.

Analysts from ING noted that in Germany, higher mortgage rates have returned, housing affordability is deteriorating, and demand for mortgage loans is weakening.

When inflation is taken into account, real house price growth remains strong in many countries. In the EU, with inflation at 3.2%, house prices rose by 1.5% in real terms. In Portugal, with inflation at 3.6%, real growth reached 12.1%. Real growth was also above 7% in Slovakia, Bulgaria, Lithuania, Spain, Latvia, Denmark, Hungary, and Croatia.

However, six countries recorded declines in real terms, led by Luxembourg with a fall of 6.4%. Real house prices also fell by 3.2% in France and 2% in Germany.

Kalmet identified three factors driving prices: persistent housing shortages, household income growth, and changing mortgage conditions. In many European countries, residential construction has failed to keep pace with demand.

Looking ahead, Kalmet expects that persistent housing shortages and continued demand could support further price increases in many markets. However, he cautioned that another year of double-digit increases should not be taken for granted. "The biggest uncertainty is interest rates. The ECB raised rates in September 2026 in response to renewed inflationary pressures. Higher mortgage costs, combined with weaker purchasing power caused by rising energy prices, could slow housing demand."

The ING analysts added that prospective buyers in Germany now face a challenging combination of higher property prices, higher financing costs, and the lingering effects of weaker real purchasing power.

For now, Europe's housing market remains a story of two speeds. In Portugal and Bulgaria, prices are soaring. In France, Finland, and Luxembourg, they are falling. And for millions of Europeans, the dream of homeownership is either getting further away or becoming slightly more attainable, depending entirely on which side of the border they live on.

Written by Martina Kirchner martina.kirchner@alpineweekly.com