European prime residential market rents are projected to see 3.2 percent annual growth between 2025 and 2029, despite most governments having tightened rental regulations in recent years, says AEW.

In a new report called European residential returns to focus on current income and rental growth, the manager says new supply of housing remains limited and continues to fall short of most government targets. In addition, the private-rented stock is decreasing as a result of regulations making buy-to-let investments less attractive in the United Kingdom, the Netherlands and France. At the same time, despite lower mortgage rates and a recovery in lending volumes over the last year, affordability for homeowners is projected to remain challenging as house prices are forecast to increase by 3.5 percent annually between 2025 and 2029 in both the eurozone and the United Kingdom.

During the same period, AEW estimates European residential total returns are expected to reach 7.7 perc