The European residential market currently finds itself headed towards a supply crisis. Meanwhile, demand continues to increase.

If governments address this crisis in the right way, with the right solutions, these changing dynamics have the potential to create material investment opportunities for institutional investors.

Major economies are not building enough houses to keep up with the demand. This is exacerbating issues around affordability. And although many governments have attempted to resolve this issue with regulation, the real answer lies in increasing supply.

Countries such as Germany and the United Kingdom have consistently missed published construction targets of 400,000 and 300,000 per year, respectively. JLL estimates there has been an undersupply of 1.6 million houses during the past five years across Germany, France and the United Kingdom. In addition, the number of residential permits across Europe has declined dramatically during the past year.