A pandemic, an economic crisis of historic proportions and a seemingly endless upwards surge in the price of houses — it seems an unlikely combination.
Yet house prices in the EU increased by 5.5% last year, a rise almost as big in scale as the 6.2% collapse in GDP that the bloc's pandemic-battered economy suffered.
Prices had been rising fast in Europe in the years before the pandemic but the health crisis has brought its own unique confluence of accelerants. Huge government stimulus packages have helped keep borrowing costs at historic lows while prospective buyers' private savings have swelled amid stay-at-home orders.
On top of that, the pandemic has prompted both a major cultural shift towards remote working and a newfound appreciation among millions for the value of one's own home. Demand for houses has soared, exceeding a sluggish supply.
Something else has been booming in Europe's property market though: the volume of institutional investment, particularly in the form of international capital flows from major corporations, hedge funds and other financial market actors.
Wall of money
According to data from Real Capital Analytics, institutional investment into Europe's residential market hit a new record in 2020, accounting for nearly 30% of total acquisition activity. That represents a huge jump from a rate of 10% in 2015.
The characteristics of the pandemic have helped fuel a trend that had already been developing, according to Oliver Knight, a residential property expert with Knight Frank, a real estate consultancy.
"Rising investment comes as we start to see a structural shift into residential investment markets away from some of the more traditional real estate sectors, such as offices and retail," he told DW.
"Data continues to suggest that the residential sector, and multifamily (multiple housing units in one building) in particular, has weathered the impact of the pandemic well, with rent collection and occupancy rates higher compared with other managed real estate assets."
The flow of money into European real estate is nothing new, but the trend has clearly been accelerating. In Germany, foreign investment into commercial real estate quadrupled between 2010 and 2017, according to research by Bulwiengesa, a consultancy.
Ireland's cautionary tale
In some European countries, there have been tensions over rising levels of institutional investment in the housing sector, particularly as both rents and house prices rise.
In Ireland, a massive 78% of the more than €5 billion ($6 billion) pumped into the commercial and residential property market between 2017 and 2019 came from overseas investors, much of it from large financial enterprises in the US.
Government tax breaks and incentives instituted in the wake of the country's 2009-11 economic crisis have attracted multibillion-dollar hedge funds and private equity funds as well as vulture funds, which specialize in buying up distressed loans.
Things appear to have reached a tipping point however. Earlier this month, a US real estate investment company called Round Hill Capital bought all 112 properties in a new housing development just outside Dublin. The deal was seen as exemplifying the problem in the Irish housing market, where first-time buyers are forced to compete for ever fewer, ever more expensive houses while rents rise unabated.
Aidan Regan, an associate professor at University College Dublin, says that the large-scale institutional investment that the Irish government has attracted into the market has focused on buying up existing stock and renting it out at higher prices, rather than financing new developments for future sale.
"What the government didn't anticipate is that once you invite all these people in, they really will gobble up your housing stock," he told DW. "They are here to make money and to make profit. Now the government is just on the back foot and they don't know what to do."
Berlin's rent wars
The German capital Berlin has also been at the center of a debate on the nature of this kind of real estate investment. Big capital from foreign markets has poured into the city in recent years, including from the likes of Warren Buffett.
Much tenant ire has also been focused on two large domestic real estate firms, Vonovia and Deutsche Wohnen, both of which count the US fund BlackRock, the world's largest asset manager, as a major shareholder.
There have been protests and clashes, particularly in the context of rapidly escalating rents. Anti-gentrification campaigners have recently targeted the Swedish company Heimstaden Bostad, which has been buying up thousands of apartments. Another company, the UK's William Pears Group, owns at least 6,000 apartments and was at the center of a high-profile eviction last year of the long-term tenants of a popular bar in a low-income area of the city.
Housing as Europe's next big political issue
There is currently much uncertainty as to how a settled post-pandemic property landscape will look across Europe.
There have been some suggestions that some cities will struggle to maintain the kind of property price and rental growth they saw in the years leading up to the pandemic. In a recent study, Dutch banking group ING said rental incomes had fallen sharply in Amsterdam during 2020, with a fall in net migration to the city due to the pandemic a major factor.
However, many property specialists believe Europe's residential market will remain a sought-after investment for flows of international capital. "Rising affordability pressures have been one of the key factors driving demand for rental housing, and by association investor interest in residential markets, across Europe," Knight told DW.
He points out that 80% of EU housing markets have seen house price-to-income ratios widen in the past five years, without a shortfall in supply being addressed in that time. He expects investors to continue pouring in a result, given the expectations that buy-to-rent will remain lucrative across the EU.
However, the issue is becoming increasingly political, especially for those feeling either priced out from ever buying a home, or from those facing higher rents with less security. Many commentators have suggested that once the pandemic finally subsides, the availability of housing will become a defining political issue. That may put pressure on governments to deal with the kind of large institutional investors who have poured in recently.
"Housing, like labor, is not something that can be bought and sold on the open market with the highest and the lowest price," says Regan. "You are talking about real, living human beings and social communities. People are likely to think about housing as a home and not as a piece of property that can be bought and sold on an open market to make the most money."