Large investors are driving up house prices and rent across Europe, says study

Large investors such as private equity and pension funds are driving up the price of rents and housing in major European cities, according to new research.

About €64bn (£53bn) worth of housing was bought and sold by institutional investors in 2020 and the total value of their property was €150bn, according to data from Cities for Rent.

Berlin was found to have €40bn worth of institutional housing, the highest amount in Europe and more than the combined totals of London and Amsterdam, the next two highest. Paris and Vienna followed.

The research forms part of a report by Daniela Gabor, professor of economics and macrofinance at the University of the West of England, and Sebastian Kohl, economic researcher at Berlin’s Free University, that suggests European housing was becoming more attractive to large investors due to accomodating regulations and near-zero interest rates.

Data from the European Central Bank showed that in 2021 real estate funds had a value of €1 trillion – equivalent to Spanish GDP – up from around €350bn in 2010.

Private equity company Blackstone is the largest institutional investor in housing in the world and owns 65,000 residential units across five European countries. It posted record profits in October.

The report said that of the $730bn (£545bn) in funds managed by Blackstone, $230bn was in real estate in September.

Blackstone said institutional ownership was not to blame for the ills of the housing market.

A spokesman said: “The significant undersupply of housing across the globe is the cause of rental rate increases.

“Blackstone owns a tiny fraction of the tens of millions of rental properties in Europe. Given our ownership levels, we have no ability to impact broader rent trends and anyone suggesting that such a small player could influence rental rates is engaging in a willful misunderstanding of how the market works.”

“We believe that financial institutions play a positive role in addressing the chronic undersupply of housing across the continent, and invest hundreds of millions to improve properties for tenants.”

Countries across Europe have been under pressure for years from rising housing and rent prices. According to Eurostat, house prices increased by 7.3 per cent in the eurozone in the second quarter of 2021 compared to the same period in 2020.

The report into institutional ownership – commissioned by the Greens-EFA group of the European Parliament – inspected what is likely to become a more contentious issue in real estate.

In the past year, Spain and Ireland have introduced restrictions on institutional investors in housing, while Berlin residents voted to seize property from big landlords such as Vonovia and Deutsche Wohnen.

The Greens-EFA said institutional ownership was responsible for evictions, rising rents and inflating house prices to unsustainable levels.

It said the EU should consider how current regulations have allowed the housing market to succumb to what it called “financialisation”.

Kim van Sparrentak, a Dutch member of the European Parliament for the Greens-EFA, said: “Rather than a fundamental right to be guaranteed for all, housing has increasingly been considered a market to make profits through speculative acquisitions and the so-called financialisation of the housing market, especially in cities, where investors such as Blackstone treat housing as a tradeable asset.

“This has a dramatic effect on prices. The European Commission should evaluate the impact of EU rules on financialisation, ensure better transparency on real estate transactions and ownership and put forward proposals to better protect mortgage borrowers from eviction.”