European residential: the great acceleration
Residential: at the heart of diversification strategies
The Covid-19 pandemic has reshuffled the cards in European residential markets, simultaneously triggering disruption whilst strengthening pre-crisis trends in the use of our living spaces. From working from home to urban flight, the times were ripe for a renewal of the European residential market.
In the on-going reorganisation of work, homes must allow workers to work from home by ensuring appropriate peace and quiet.
As time spent at home has increased, expectations of housing have also changed, with two main themes emerging: residents’ health and wellbeing.This new landscape has resulted in households changing their behaviours around housing.
Primarily the preserve of high-income households, second or semi-principal residences remain a niche market. This type of housing is currently seeing a degree of success, particularly amongst those who suffered during lockdowns (limited space, lack of garden or terrace in major cities). This led to a surge in prices in holiday regions, with the arrival of managerial level buyers able to work from home several days per week and with considerable purchasing power.
Similarly, regional markets for semi-principal residences offer real buying opportunities for renting households who can not afford to buy in major cities. This said, with a return to a more normal life, mixing office and home working, everyday concerns will return to the fore. Thus, in recent opinion surveys, households wanting to move out of the city centre to gain living space (more square metres, terrace, garden etc.) are paying attention to their commuting times. Under these circumstances, households are mainly selecting inner and outer suburbs, whilst making sure that their commute does not exceed 45 minutes. As a result, cities with good public transport coverage of their urban area will be favoured, and particularly those where new underground and tram lines are being constructed.
Meanwhile, cities in advanced economies will remain the central lynchpin of modern economies, due to the employment they generate, the growth in wealth that they produce and the concentration of services that they offer their inhabitants (public services, transport hubs, and their offerings in culture, education and real estate). Lastly, the lack of economic dynamism, weak infrastructure coverage and poor connectivity of some cities will limit their attractiveness. What we are seeing, therefore, is a reorganisation within major urban centres rather than the urban exodus that might have been expected.
The purpose of this report is to aid understanding of the issues in residential investment in the current climate, whilst noting the fundamentals that persist despite the crisis, and to identify sources of future growth in specific markets. It has 3 parts:
- 1. Domination of urbanisation post-Covid;
- 2. Towards a complex residential sector: the emerging models;
- 3. The institutionalisation of housing.
With a university education in local economic development, Daniel While began his career as business establishment consultant to local authorities. In 2006, he joined the Institut de l’Epargne immobilière et Foncière as analyst, and specialised in the world of unlisted real estate funds (SCPIs and OPCIs for France).
He is co-author of the book Les OPCI published by Delmas (September 2008). He joined Primonial REIM in 2017, where he held the position of Development Director, then Research & Strategy Director from 2019.
Henry-Aurélien Natter joined Primonial REIM as Research Manager in January 2018. He has the mission of developing the analyses of the Research & Strategy Department on the real estate markets, the economy and capital in France and in Europe.
Henry-Aurélien Natter began his career at Les Echos Etudes (formerly Eurostaf), then at C&W (formerly DTZ), and lastly at BNP PRE, where he acquired solid and varied experience in real estate research, strategy and finance. He is qualified with an AES degree in Business Management, a Masters Decree in management and SME management, and an International Master in commerce and marketing.
After a successful internship in Primonial REIM France's Research and Strategy team, Adrien Isidore joined the team as an economist-statistician in late 2020. Adrien holds a Master's degree in Economics and Statistics from Panthéon-Assas.
Adrien Isidore decided to become an economist after an exchange program in Australia during which he worked in international research groups on various projects, giving him a taste for research. He also holds a bachelor's degree in economics and a university degree in mathematics and finance. His role is to propose innovative statistical tools and to write studies on different countries while providing support in the structuring of the department at the European level.