Housing affordability comes down to three variables: prices, incomes, and borrowing rates. Between 2015 and 2025, housing prices across the European Union rose by roughly 65%, or about 5% per year in nominal terms (Eurostat, House Price Index). Over the same period, nominal wage growth ran at about 2.5 to 3% per year (OECD Wage Bulletin 2025) — and in real terms, wages in half of European countries had still not recovered to their 2021 levels by early 2025.
For more on wage dynamics in Europe, see A salary is no longer enough
In 2021, a couple could borrow at 1% over 25 years and secure roughly €300,000 in credit. The same couple, on the same salary, borrowing at 4% in 2024, could only get €220,000. Purchasing power dropped by a quarter without incomes moving a cent. In France, economist Jacques Friggit has been tracking these effects over decades: it now takes about 23 years of income to buy an average home, compared to 15 at the start of the 2000s. And France is far from the worst hit — the price-to-income ratio has actually improved slightly there compared to Portugal, the Netherlands, Switzerland, Austria, or Czechia (Statista/OECD).
The market will not self-correct
The first instinct, faced with soaring prices, is to assume it can’t last — that political and social forces will kick in to fix this, or that the market will correct itself. But as housing becomes increasingly unaffordable, workarounds are emerging: in Brussels and Luxembourg City, buildings are sold separately from the land through 99-year emphyteutic leases. In Lille and Ghent, Community Land Trusts are experimenting with split ownership. It’s inventive, but it’s also an admission that full ownership is becoming a luxury.
Demand is no longer driven by households alone. In Amsterdam, 25% of the housing stock now belongs to institutional investors — pension funds, REITs, build-to-rent operators. In Dublin, 22%. In Zurich, 20%. In London, 18%. These players don’t buy with a payslip and a 33% debt-to-income ratio. They buy with institutional capital, on 20- to 30-year horizons, with yield targets that shift according to their needs. They turn residential buildings into financial assets. Every flat they acquire is one removed from the ownership market.
Prices are therefore no longer indexed to household purchasing power, but partly to international capital flows. These flows could shrink if central bank rates rose durably — sovereign bonds and other asset classes would become more attractive than residential property. But a significant rate increase would also crush household borrowing capacity and slow economic growth. It’s a dilemma: the scenario that pushes institutional investors out of housing is also the one that makes mortgages unaffordable for individuals. The room for manoeuvre is narrow.
On the housing affordability crisis, see Unaffordable housing: why financial assets are becoming essential to building wealth
Demographics: a false “hope”
The second instinct is demographic. Europe is ageing, birth rates are falling, the population will decline. Fewer people, less demand, prices should drop. The projections, however, tell a counter-intuitive story. Italy will lose 14 million people by 2070 — nearly a quarter of its population. But the number of households in Milan could fall by only 5%, under the effect of two opposing forces: household size, which is shrinking everywhere in Europe — more singles, separations, and young adults leaving home, each split household creating additional demand; and metropolisation, a centrifugal force driven by our growth model, concentrating the population in major cities.
In Germany, between 2000 and 2020, the country’s natural demographic dynamic (births minus deaths) was negative. Yet the total number of households grew by over 2 million — driven by household fragmentation and immigration. Berlin’s rental market has become one of the tightest in Europe — rents rose 12% in 2024 (CBRE/Berlin Hyp Housing Market Report 2025).
The demographic tipping point (the moment when the number of metropolitan households actually starts to decline) would not arrive until 2055–2065 in Italy, Poland, or Portugal. And beyond 2070 for France, the UK, or Ireland. For Generation Alpha, that’s too late. For Generation Beta, it’s barely in time. And even then, the effect may be insufficient: in Milan, despite the country’s significant depopulation, the combination of urban concentration and household fragmentation could maintain enough price pressure to keep a median-income couple from buying a 50m² flat.
Three levers that actually change the trajectory
If neither the market nor demographics self-correct, what’s left? Three levers stand out, and all three are actionable.
Remote work: the only factor that changes the geographic equation
Structural remote work (stabilised at 25 to 35% of skilled jobs in Europe) is the only factor capable of reducing the tendency of major cities to absorb ever more households.
If remote work rose from 30% to 50%, pressure on central city prices could drop by 8 to 15% depending on the metro area. That’s the difference between a couple that can afford 45m² and one that can afford 52m². It’s not revolutionary. But it’s the only factor that turns demographic decline into an advantage for major cities.
For parents, the implication is direct: the city where your children work may not be the one where they live. And that geographic choice could matter as much as their salary in determining whether they can buy.
Early wealth transfer: timing matters more than the amount
European baby boomers hold over €20 trillion in real estate wealth. It’s the largest stock of wealth in the continent’s history. And it will be passed on — but not at the right time.
Rising life expectancy is pushing the average age of inheritance beyond 55. A child born in 2015 will probably inherit around 2070–2075. Their first-time buyer window falls between 2040 and 2050. There is a 25-year gap between the need and the resource.
Early gifting can change this equation. In France, each parent can transfer €100,000 per child every 15 years tax-free. Each grandparent can transfer €31,865 per grandchild. A couple of grandparents gifting to a grandchild means €63,730 tax-free at age 25 — a deposit that changes a trajectory — rather than an inheritance at 55 that pays for a new roof. Many European countries have equivalent mechanisms with different thresholds and timelines.
This is not a complex wealth strategy. It’s a question of timing. And for those who can, it’s probably the most impactful decision they will make for the next generation.
Financial preparation: build before you buy
Baby boomers built their wealth with a single asset: a flat. The deposit came from a savings account, the mortgage did the rest, and rising prices served as a wealth strategy. That model is over.
For Generations Alpha and Beta, wealth will first be built on financial markets (stocks, ETFs, bonds), thanks to the foresight and investments of their Millennial parents, before eventually converting into real estate. Risk-free savings at 2–3% are no longer enough when housing prices rise at 5% per year: every year of conventional saving is a year the target moves further away. Only vehicles capable of delivering 5 to 7% annualised over the long term (which equity markets have historically done over 20–25 years) make it possible to outpace the housing market.
Yet most households that invest today do so with tools designed for a different era: positions scattered across multiple brokers, a tax-advantaged plan here, a life insurance policy there, a spreadsheet to try to make sense of it all. We went from the simplest asset to manage — a flat that appreciates on its own — to the most complex, without the tools catching up. And it’s by investing in markets today that the next generation’s success will be determined.
On the need for the right tools to track your wealth, see Tukhe: what portfolio tracking actually should be
The scenario to prepare for: buying solo
One last finding the projections highlight, and one few people anticipate: half of Generations Alpha and Beta will enter the housing market alone.
Coupling is happening later and later. The share of single-person households is rising across every European country. Alternative living arrangements (long-term flatsharing, co-living, extended stays with parents) are becoming the norm before 30.
A solo buyer has less than half the borrowing capacity of a dual-income couple. Today, a single person on the median salary cannot buy a 50m² flat in any of the 12 cities studied. And the situation deteriorates with every five-year projection.
Preparing your children for homeownership also means preparing for this scenario. A larger deposit, savings habits built early, maximum geographic flexibility, and the clear-eyed awareness that the “permanent contract + couple + 25-year mortgage” model will not be universal.
What these projections don’t say
These are trends, not certainties. Projections beyond 2050 are highly uncertain. Immigration, not explicitly modelled, could alter demographic trajectories. A major financial crisis could reshuffle the deck. And public policy (regulating institutional investors, accelerating new construction, overhauling inheritance taxation) could fundamentally change the equation.
In fact, when you model a scenario where prices and wages converge at 2% per year (which requires ambitious but not unrealistic regulation), affordability stabilises for every generation.
But without that regulation, waiting for the market to correct itself is not a strategy. Anticipating, transferring wealth early, and building a diversified financial portfolio before targeting real estate: that is what will separate those who can buy from those who cannot.
This analysis draws on Eurostat demographic projections (EUROPOP2023), Eurostat house price indices, OECD and ECB wage data, and a forward-looking model covering 12 European metropolitan areas over the 2025–2070 horizon.
