Across Europe, housing affordability has become one of the most binding economic constraints facing households. In many major cities, the relationship between incomes and home prices has broken down to a point where ownership is no longer a realistic goal for a growing share of the population. What was once a localized issue in global cities is now a structural European problem, visible from Western capitals to Central and Eastern Europe.
One of the clearest ways to illustrate this shift is to look at housing costs relative to income. According to comparative indices, Prague currently stands out as the most extreme case: purchasing a standard 70 square meter apartment now requires 14.8 average annual salaries (Radio Prague International, 2025). That figure alone captures how far affordability has deteriorated. Yet the broader message is about a continent where similar pressures are becoming increasingly common.
A Europe-Wide Affordability Squeeze
Housing affordability across Europe has worsened steadily over the past decade, but the post-pandemic period accelerated the trend. Strong demand, low interest rates during the 2010s, and rising construction costs pushed prices far ahead of wage growth. Even as interest rates rose sharply after 2022, prices proved surprisingly sticky in many markets, shifting the burden from buyers’ purchasing power to monthly affordability rather than triggering broad price corrections.
Comparisons across capitals highlight the pattern. Bratislava requires roughly 14.1 annual salaries for a comparable apartment, Warsaw 9.6, and Vienna 7.7. These differences reflect local conditions, but the direction is shared: housing has become progressively more expensive relative to what people earn. Prague’s position at the top simply makes the imbalance impossible to ignore.
The Structural Drivers Behind Europe’s Housing Problem
Experts across Europe point to a similar combination of factors behind the affordability crisis. Demand has remained resilient due to urbanization, smaller household sizes, migration into cities, and housing’s role as a store of value. At the same time, supply has failed to keep pace. Construction volumes in many European countries remain below long-term needs, constrained by slow permitting, limited land availability, high material costs, and labor shortages in the building sector.
Another often-overlooked factor is Europe’s aging housing stock. In many countries, a large share of homes was built decades ago and requires significant renovation or replacement. This reduces the effective supply of modern, energy-efficient housing and adds cost pressures that feed into prices and rents. The result is a market where new supply is both scarce and expensive, reinforcing affordability problems rather than alleviating them.
From City Problem to National Constraint
What makes the current situation different from previous housing cycles is that affordability pressures are no longer confined to a handful of global cities. National-level indicators increasingly reflect the same stress. In Czechia, for example, the average home now costs 13.6 annual salaries, up from 12.9 a year earlier, placing the country among the worst performers in the EU according to the 2025 Prosperity and Financial Health Index.
This matters because housing affordability has broad economic consequences. High housing costs reduce labor mobility, delay family formation, increase household debt burdens, and limit disposable income for consumption. Over time, they also influence where companies invest and where skilled workers choose to live.
Why Europe Has Struggled to Respond
Unlike short-term inflation or cyclical downturns, housing affordability is difficult to fix quickly. Increasing supply requires years of planning reform, infrastructure investment, and political consensus. Rent controls or purchase subsidies can ease symptoms but rarely address the underlying imbalance. Meanwhile, demographic and urban trends continue to push demand upward.
As a result, many European governments find themselves managing a slow-moving crisis rather than resolving it. The risk is that housing becomes a permanent bottleneck for growth, especially in cities that are otherwise economically dynamic.
What to Watch Going Forward
Looking ahead, the key question is whether Europe can close the gap between housing supply and demand. Indicators to watch include construction volumes, permitting timelines, renovation rates, and how quickly wages can realistically catch up with housing costs. It has become a core economic challenge for Europe, shaping social outcomes, labor markets, and long-term competitiveness. Prague may be the most visible example today, but the underlying dynamics extend far beyond one city or one country.
