In recent years, the European real estate market has undergone significant changes, influenced by interest rate fluctuations, economic conditions, and regional demand. With the European Central Bank (ECB) cutting interest rates for the fourth consecutive time in early 2025, many investors are wondering: is now the right time to invest in European real estate? This article explores market trends, the impact of interest rates, and the best European countries for property investment.

The Evolution of Interest Rates in Europe

Until 2022, the ECB maintained an expansionary monetary policy with historically low interest rates to stimulate the economy. This policy became particularly relevant after the COVID-19 pandemic, which disrupted economic activity across the continent.

By mid-2022, the interest rate in Europe was at 0%. However, as inflation surged—partly due to the energy crisis triggered by the war in Ukraine—the ECB had to increase rates aggressively. By September 2023, interest rates had reached 4%, marking a stark contrast to previous years.

As inflation cooled, the ECB began lowering rates in 2024, and by January 2025, the reference rate had dropped to 2.75%. Analysts expect further cuts throughout the year, which is a crucial development for potential real estate investors.

How Interest Rate Cuts Affect the Real Estate Market

Interest rates play a fundamental role in the real estate sector. Lower rates mean reduced mortgage costs, making financing more accessible for buyers. This leads to increased demand, which can drive property prices higher in sought-after locations.

For those looking to invest in European real estate, now might be an opportune moment. With financing becoming cheaper and demand expected to rise, property values in key cities are likely to appreciate in the coming years.

Will Property Prices in Europe Increase?

As borrowing costs decline, more people can afford to purchase homes, leading to an uptick in demand. This, in turn, tends to push property prices upward, particularly in high-demand cities with limited housing supply.

However, real estate prices are also influenced by other factors, including:

• The overall economic stability of a country
• Consumer confidence in the market
• Supply and demand dynamics in specific cities or regions

Given these conditions, investors must carefully assess market trends before making purchasing decisions.

Top European Countries for Real Estate Investment in 2025

Each European country offers distinct advantages and potential risks for real estate investors. Below is an analysis of five prominent markets:

1. Portugal

Portugal has been a popular destination for foreign real estate investors due to its relatively affordable property prices compared to other Western European countries. Lisbon and Porto are the top cities for investment, though they are also among the most expensive.

• Current Market Trends: Property prices in Portugal have continued to rise despite past interest rate hikes. According to data from Idealista, property prices increased by 10.4% from December 2023 to December 2024.
• Average Property Prices:
  • National average: €2,800 per square meter
  • Lisbon: €5,718 per square meter
  • Porto: €3,705 per square meter
  • Braga (a more affordable alternative): €1,975 per square meter

Portugal remains attractive due to its stable market, quality of life, and Golden Visa program, which previously offered residency to non-EU investors.

2. Spain

Spain is another solid option for real estate investment, particularly in Madrid, Barcelona, and coastal regions like Costa del Sol.

• Market Trends:
  • Spain has seen a 19% increase in property prices over the past year, as reported by Properstar.
  • The average price per square meter is €2,365, making it more affordable than some Western European markets.
  • In Madrid, prices reach €4,011 per square meter.

Spain remains a competitive market with strong demand from international buyers, particularly in tourism-driven areas.

3. Germany

Germany is known for its economic stability and strong real estate demand, especially in Berlin and Munich.

• Market Trends:
  • Germany has higher property costs but offers long-term stability.
  • The national average price per square meter is €4,741.
  • In Berlin, prices reach €8,515 per square meter.

While Germany offers a secure investment environment, it is a more expensive market than Portugal or Spain.

4. Poland

Poland presents an emerging real estate market with significant growth potential, especially in Warsaw and Kraków.

• Market Trends:
  • Poland’s real estate sector is expanding due to economic growth.
  • While generally affordable, some areas require special permits for foreign buyers.

Poland is ideal for investors looking for high growth potential at lower entry costs.

5. Greece

Greece’s real estate market is recovering from years of economic crisis, offering attractive prices and investment opportunities.

• Market Trends:
  • Prices are lower than in many Western European nations.
  • Islands like Crete and Mykonos present strong rental potential.

Greece is an excellent option for investors seeking affordable properties with long-term appreciation potential.

Can Foreigners Buy Property in Europe?

Yes, foreigners can purchase property in most European countries. Here’s a breakdown of the rules in key investment destinations:

• Portugal, Spain, Germany, and Greece: No residency is required to buy property.
• Poland: Non-residents may need government approval for certain property types.

Can Foreigners Get Mortgages in Europe?

Obtaining financing as a foreigner varies by country:

• Portugal & Spain: Foreigners can access mortgages but typically need a 30-40% down payment.
• Germany: Financing is available but requires proof of stable income.
• Poland: Possible but with bureaucratic hurdles.
• Greece: Mortgages for foreigners are rare.

Alternatively, some Brazilian financial institutions offer international real estate consortia, allowing investors to buy properties abroad through structured payment plans.

Conclusion: Is Now a Good Time to Invest in European Real Estate?

The recent interest rate cuts by the ECB make property investment in Europe more attractive. However, investors should carefully analyze each country’s economic stability, property price trends, and financing options before committing.

• For Stability and Growth: Germany and Portugal are strong choices.
• For Competitive Prices: Spain and Greece provide affordability with potential for appreciation.
• For Emerging Markets: Poland offers low-cost opportunities with high growth potential.

Ultimately, the best investment decision depends on individual goals, risk tolerance, and market analysis. Consulting a local real estate expert can help navigate the complexities of foreign property investment and maximize returns.

By taking a strategic approach, investors can capitalize on the current market conditions and secure valuable real estate assets in Europe’s most promising locations.