House prices across Europe continued their upward march in the second quarter of 2026, but the pace of growth varied dramatically from one country to the next. According to fresh data from Eurostat, prices in the EU rose by an average of 4.7% compared with a year earlier, comfortably ahead of the bloc's inflation rate of 3.2%. Yet behind that average lies a continent split between booming markets and those where buyers are retreating.
Double-digit growth in southern and eastern Europe
Portugal recorded the steepest annual increase among the 29 countries surveyed, with house prices jumping 16.5%. Bulgaria followed closely at 15.5%. Both countries were among nine that saw price growth exceed 10% in the April-to-June period.
Mikk Kalmet, a real estate analyst at Global Property Guide, attributes Portugal's surge to a persistent imbalance between demand and supply. "Limited new construction, foreign investment, tourism-related demand and persistent housing shortages have all contributed to rising prices," he told European Pulse. The pressure is most acute in Lisbon, Porto, and popular coastal areas.
In Bulgaria, Kalmet points to rising household incomes, wage growth, relatively affordable mortgage financing, and strong appetite for property as an investment. Lithuania (14.3%), Slovakia (13.6%), Croatia (12.7%), Spain (12.1%), Romania (12.1%), Latvia (11.4%), and Hungary (10.2%) also posted double-digit gains. Denmark (9.4%), Slovenia (9.1%), and Czechia (8.6%) were just below that threshold.
Where prices fell
Only three countries saw year-on-year declines: Finland (-2.7%), Luxembourg (-2.2%), and France (-0.8%). Kalmet links Finland's weakness to sluggish economic growth, subdued consumer confidence, and the lingering impact of higher interest rates. In France, he says, "affordability constraints, relatively weak housing demand and the effects of previously elevated mortgage rates have put downward pressure on prices," with economic uncertainty prompting some buyers to delay purchases.
Among the EU's largest economies, the contrast is stark. Spain's 12.1% rise stands out, while Italy managed just 4%—below the EU average. Germany saw a marginal 0.6% increase, barely above France's decline. Analysts at ING note that in Germany, "higher mortgage rates are back. Housing affordability is deteriorating. Demand for mortgage loans is weakening."
Local fundamentals drive the divide
Kalmet stresses that housing markets are inherently local, even within a currency union. "Housing markets are fundamentally local, even though European countries share many of the same economic and monetary conditions," he says. The key drivers are national housing shortages, income growth, mortgage conditions, and demographic trends. Countries with strong demand and limited construction—like Portugal and Bulgaria—see faster price increases, while those with weaker growth or greater sensitivity to borrowing costs lag behind.
Real gains remain strong
Even after adjusting for inflation, price growth remains robust in many markets. With EU inflation at 3.2%, real house prices rose by 1.5% on average. Portugal's real increase was 12.1%, and several countries saw real growth above 7%: Slovakia (9.4%), Bulgaria (9.1%), Lithuania (8.8%), Spain (8.3%), Latvia (7.9%), Denmark (7.7%), Hungary (7.7%), and Croatia (7.5%).
At the other end, six countries recorded real declines, led by Luxembourg (-6.4%), France (-3.2%), and Germany (-2%).
What's next for European house prices?
Looking ahead, Kalmet expects persistent shortages and continued demand to support further price increases in many markets, but he cautions that another year of double-digit growth is not guaranteed. "The biggest uncertainty is interest rates," he says. The European Central Bank raised rates in September 2026 in response to renewed inflationary pressures, and higher mortgage costs—combined with weaker purchasing power from rising energy prices—could cool demand.
In Germany, ING's analysts warn that buyers now face a challenging mix of higher property prices, higher financing costs, and the lingering effects of weaker real purchasing power, exacerbated by the economic fallout from the war in the Middle East. For a deeper look at how energy costs are squeezing households, see our analysis of record diesel prices and their impact on inflation.
The housing market remains a patchwork across the continent. While southern and eastern Europe enjoy strong momentum, parts of western and northern Europe are cooling. For tenants, the picture is equally uneven—our guide to eviction rules across Europe shows how protections vary widely. And as prices climb, the debate over housing policy intensifies, with measures like Spain's housing vote becoming a political flashpoint.
