Europe needs 3.6 million private rental homes over next decade

LONDON, April. 03, 2024 - Growing demand for private renting in Europe will call for an extra 3.6 million rental homes over the next decade, reflecting a €1.4 trillion investment opportunity for institutions, according to JLL.

Urbanisation, immigration, affordability, among other long-term structural trends, have made the PRS the fastest growing tenure in the region.

JLL’s European Living Capital Markets Growth & Opportunity report shows in the UK and EU the sector has grown by 14% over the past decade. This compares to a 5% increase in home ownership and a 1% decline in social housing.

Over the next decade, JLL forecasts the UK/EU PRS will grow to at least 56.6 million homes, with private renting rising to account for 24% of households.

Europe’s five-year average (2019-23) living investment of €79 billion includes €17.3 billion in forward investment. In 2023, this fell to €12.2 billion, just 0.9% of the investment needed to meet the upcoming demand.

Institutional-owned private rental forms the minority. Some 5.3m institution-owned homes are 10% of the UK/EU PRS. Including purpose-built student housing, later living/care homes and coliving this rises to 7.4 million homes versus some 47.7 million private rental homes outside the sector, largely owned by small private landlords.

The professional institution share of private rental is slowly growing. In 2023, there were an estimated 200,000 new institution rental homes. This equates to just 30% of the annual demand.

To reach maturity of 40% market share would require 15.9m additional homes or 17.4m including the future 10-year demand, reflecting a €7.2 trillion investment opportunity, at current capital values.

Europe will need a large increase in construction and forward investment to support this level of purpose-built supply. Over the past five years, the overall living investment per capita in key European markets has been a quarter of that in the United States.

If the key European markets were to rise to the same share of investment for their respective populations, this could see annual investment rise from €43.1billion to €210 billion, based on trends from the US from a decade ago, with a maximum potential of €310 billion per annum at peak levels.

Gemma Kendall, head of multifamily investment, international capital markets EMEA, JLL comments, “European demand for private rental homes is soaring and institutions are primed to play a pivotal role in this dynamic market. As urbanisation and demographic shifts reshape housing needs across Europe, we're seeing a unique combination of long-term demand drivers and increasing investor interest that suggests a significant growth trajectory ahead."

Emma Rosser, living research director, EMEA, JLL, said, “There is already an obvious shortage of quality rental housing in Europe. With millions more in need of accommodation in key markets, without significant investment this undersupply will worsen.

“Institutions will be essential to unlocking housing at scale. Professional investors today account for a small portion of the living landscape, but this will change as growing markets continue to attract capital for new purpose-built products.”