The European residential sector is poised for substantial growth by 2040, according to the Cushman & Wakefield report “Unpacking Europe’s Living Revolution.” The demand for different types of residential accommodation is increasing, driven by broader demographic changes and specific factors, including the unaffordability of traditional housing prices, urban growth, an ageing population, and higher education levels.
The rise in demand for private rental accommodation is supported by a decline in housing affordability across Europe. Traditional residential affordability has decreased by nearly 30% in the UK over the past decade and up to 50% in other European countries, including Portugal and Ireland. This situation, dubbed the “rental generation,” combined with a lack of rental market supply, has led to a sharp increase in rental prices in almost all European countries. Poland leads with a 29% increase over the past three years, followed by Portugal (15.2%), the Czech Republic (12.9%), and Spain (9.7%).
Demographic changes and urban growth are also driving demand in the residential sector. The populations of major cities are expected to grow between 5% and 15% by 2040, continuing to be a clear driver of demand in the residential sector over the next decade and beyond.
Meanwhile, the number of people over 65 is estimated to increase by between 20% and 40%, driving the growing demand for senior housing with healthcare services. At the same time, Europe has seen an increase in higher education levels, from 25% to 32% in the last decade, impacting the opposite end of the age spectrum. The need for purpose-built student accommodation (PBSA) has grown alongside this increase, as well as the migration of students from Asian and African countries to study in Europe.
According to Ana Gomes, Partner and Head of New Business & Alternatives at Cushman & Wakefield’s Investment Department in Portugal: “This study shows how Portugal stands out as one of the European countries with the greatest imbalance in the residential sector, a reality that is accentuated by significant ongoing demographic changes. The increasing arrival of immigrants, the progressive ageing of the population, and the increase in the student population are dynamics that intensify the demand for housing adjusted to specific requirements, whether economic, locational, or complementary services.”
Demand for new types of residential accommodation is expected to see a notable increase in the coming decades, according to the consultancy’s data.
“However, the absence of a corresponding supply could precipitate a more severe housing crisis. It is therefore imperative to implement extraordinary measures that motivate developers to invest in and develop new housing solutions. These initiatives should prioritise efficiency in licensing processes and the reduction of construction and operational costs. The future of this sector is at a critical juncture. Without the implementation of innovative and bold strategies, the country could face a housing crisis of considerable dimensions. However, with the right decisions, Portugal has the capacity (and the interest of developers and investors) to reverse this challenge by enhancing the supply of affordable and high-quality housing for all its inhabitants,” concludes Ana Gomes.
