For many European cities, real estate has become more than a place to live — it’s an investment vehicle. And increasingly, that investment comes from abroad. But as interest surges, so do concerns: is this growing demand making it harder for locals to buy or rent homes?
Foreign Buyers in Europe: Demand Trends and Impact on Local Housing Markets
In countries like Portugal, Spain, and Greece, foreign ownership of residential property has been rising steadily. In Lisbon, international buyers accounted for more than 40% of property transactions in certain neighbourhoods in recent years. In Athens, affordable prices have attracted investors from all over the world, including Western Europe, the U.S., and China.
These purchases often come with good intentions — families relocating, expats buying second homes, or investors seeking passive income. But the result, locals argue, is the same: prices rise, inventory tightens, and city centers become unaffordable for the people who live and work there full-time.
In some districts, local residents are increasingly outbid by cash buyers from abroad, many of whom never even live in the properties they purchase. This trend contributes to the so-called "hollowing out" of central neighbourhoods — where homes sit empty or serve only as short-term rentals.
How Foreign Investment Affects Property Prices in European Cities: Key Insights
While foreign investors play a role in heating up the market, they’re not the only factor pushing prices upward. In most European capitals, supply shortages, slow permit approvals, inflation, construction delays, and demographic shifts are also responsible.
In fact, data from several housing ministries suggest that foreign buyers make up a relatively small percentage of total transactions — often below 10% nationally. But the impact can be highly concentrated in specific hotspots, like the French Riviera, downtown Prague, or historic Lisbon, where international interest skews the local dynamics.
And in markets with small rental stocks and low vacancy rates, even a modest uptick in foreign buying can distort prices and rental costs. This is particularly evident in neighborhoods with high tourist appeal or limited zoning for new development.
Short-Term Rentals in Europe: The Impact on Long-Term Housing Supply
One of the clearest ways foreign investment affects locals is through the short-term rental market. Platforms like Airbnb and Booking.com have made it easy for property owners — both local and foreign — to rent out homes to tourists at prices far above traditional rents.
In places like Barcelona, Lisbon, Florence, and Dubrovnik, large portions of city centers are now dominated by short-term rentals. This has led to:
Shrinking supply of long-term rental homes
Sharp increases in monthly rents
Tenants facing frequent evictions due to conversions into holiday lets
Deterioration of community cohesion and neighborhood identity
Some cities have implemented strict measures, such as limiting the number of nights a property can be rented, requiring registration numbers, or freezing new short-term rental licenses altogether. But enforcement remains inconsistent, and many listings continue to operate outside regulatory frameworks.
Government Responses to Foreign Property Ownership in Europe: What’s Changing in 2025
Across Europe, governments and municipalities are waking up to the reality of housing access issues. Their responses vary widely:
Portugal ended its Golden Visa program for real estate in major cities, aiming to cool off the Lisbon and Porto markets.
Netherlands is exploring a ban on investors purchasing starter homes.
Spain has allowed regional governments to impose restrictions on investor purchases in overheated areas.
Ireland introduced a vacancy tax and increased property taxes on second homes.
Some countries are also discussing differentiated tax regimes — for instance, imposing higher transaction taxes on non-resident buyers or implementing tighter capital gains rules for foreign owners.
These changes aim to level the playing field for locals and discourage speculative ownership. However, governments must tread carefully to avoid harming legitimate international relocation, foreign direct investment, and job creation linked to housing.
Rental Affordability vs. Real Estate Investment in Europe: The Growing Tension
From an investor’s perspective, European real estate is appealing for many reasons:
It’s a tangible, appreciating asset
European markets are considered stable compared to many regions
Rental yields are attractive in emerging neighbourhoods
Diversification away from volatile domestic markets
For residents, though, the narrative is different. Incomes haven’t kept up with housing costs, especially in cities like Berlin, Paris, and Milan. Many young adults are unable to leave their family homes or are forced into smaller towns, far from economic centers.
Public frustration is growing. In 2023, protests erupted in Lisbon and Palma de Mallorca over unaffordable housing. Similar movements have gained traction in Italy and Eastern Europe, especially in university cities where students are being priced out of rentals.
The emotional toll is also real — when locals see streets once filled with neighbours replaced by transient visitors, it creates a sense of displacement and loss of community.
Is There a Middle Ground? Balancing Foreign Investment and Local Housing Needs
Completely shutting out foreign investment isn’t the answer — especially in places where it plays a vital role in urban development or tourism. But regulation and smart urban planning are necessary.
Here’s what a balanced approach could involve:
Prioritising affordable housing development, particularly in city centers
Requiring proof of residential use or minimum occupancy requirements for purchases
Capping the number of properties one person or entity can own in a given district
Enforcing property taxation on vacant homes to reduce land banking
Supporting locals with first-time buyer incentives or favorable mortgage terms
Public-private partnerships can also be part of the solution. Cities can work with developers and investors to ensure that projects include a portion of units reserved for locals at subsidized rates or long-term rental pricing.
Europe’s Housing Crisis: Managing Foreign Investment and Protecting Local Residents
Europe’s housing crisis is complex and multi-faceted, and foreign investment is just one piece of the puzzle. But it’s a piece that can — and should — be managed with more transparency and strategic intent.
Foreign capital isn’t inherently bad. In many cases, it brings innovation, renovation, and revitalisation. But when profit begins to outweigh people, and cities prioritise returns over residents, something needs to change.
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