While some investors will always find reasons to continue to ‘wait and see’ – citing factors including interest rates staying ‘higher for longer’, inflation remaining historically high, potential political instability, and shaky economic indicators – we believe that most of the lights in favour of investing in European real estate have now turned green.

Falling interest rates and less uncertainty, despite some perceptions

While a continuously uncertain global geopolitical backdrop gives rise to some caution, many of the reasons outlined above are based on misconceptions. Taking the first two points, which are somewhat intertwined, it’s clear that the opposite is true: inflation continues to trend towards target and base rates are on a downward trajectory. The European Central Bank (ECB) lowered rates by 100 basis points (bps) across 2024, and is expected to cut rates a further four or five times in 2025, which would reduce the policy rate to between 1.75% and 2% by 2026. There’s the possibility that it may go even further, especially given fiscal policy is acting as a headwind across Europe. While the Bank of England may be more circumspect, owing to some ‘stickiness’ in UK inflation, it too reduced interest rates in February by a further 25 bps to 4.5%.