The new test for property markets

Europe’s property markets are entering the second half of 2026 with a clearer message for investors, the easy “cheap versus expensive” comparison is no longer enough. The newest figures already show why. In Cyprus, property sales rose 11.9 per cent in the first five months of 2026, with 8,043 sales documents filed between January and May, compared with 7,185 in the same period last year. Limassol remained the largest district by volume, recording 2,537 sales contracts, up 11.2 per cent year on year. In Greece, the latest bank figures, published on June 9, showed apartment prices still rising, although at a slower pace. Prices increased 5.7 per cent year on year in the first quarter of 2026, with Athens up 5.2 per cent, Thessaloniki up 6.4 per cent, other cities up 5.4 per cent and other areas of Greece up 6.9 per cent. Across Europe, meanwhile, investment is recovering, but selectively. CBRE said European real estate investment reached €52.6 billion in the first quarter of 2026, up 3 per cent year on year, while volumes on a trailing 12-month basis were 13 per cent higher. JLL’s outlook made a similar point in May, saying global direct real estate transaction volumes reached $216 billion in the first quarter of 2026, up 18 per cent year on year. However, in EMEA, transactions were down 2 per cent, underlining that Europe’s recovery remains more uneven than the global headline suggests. This matters because investors are no longer buying property markets simply on the basis that they look cheaper than western Europe. They are asking whether rents, incomes, occupier demand, liquidity, financing costs and new supply can support the next level of pricing. That question is particularly relevant for Central and Eastern Europe (CEE), where the region’s most active real estate markets are no longer simply Europe’s bargain corner. That shift matters, because the old investment case for the region is becoming less reliable. For years, CEE was sold on low entry costs, catch-up growth and a clear discount to western Europe. The cities now drawing serious capital, from Warsaw and Prague to Bucharest, Tallinn and Riga, are increasingly being judged on productivity, income growth, infrastructure, liquidity and the depth of their occupier markets, rather than price alone. The change is visible in both macroeconomic and property data. The chart, based on Oxford Economics and national statistics agencies, shows that several CEE capitals and urban regions have combined strong real GDP per capita growth over the past two decades with rising nominal income levels. Warsaw, Prague, Bucharest and Tallinn are therefore not “cheap” markets in the old sense. They are cities where investors are paying for a stronger economic base and a clearer path to rental growth. The investment figures point in the same direction. Cushman said total real estate investment across seven CEE countries rose 34 per cent year on year in 2025 to €11.8bn, the strongest result in six years. The Czechia reached €4.2bn, up 155 per cent, and accounted for about 36 per cent of regional investment volume. That is not a story of bargain hunting alone. It is a story of capital returning to markets where pricing can still be defended by income, scale, liquidity and stronger local demand. The recovery is selective, however. CBRE said CEE investment turnover reached around €2.3bn in the second quarter of 2025, down 34 per cent from the previous quarter and 6 per cent year on year, as global uncertainty weighed on cross-border capital flows. However, domestic and regional investors remained active, suggesting that capital has not disappeared. It has simply become more careful. That caution is important. Investors are no longer buying CEE as one broad convergence story. They are choosing the cities where the numbers still work. The occupier side of the market makes the same point. JLL’s report said regional economies remained resilient in 2025 and 2026, with GDP growth in 2025 ranging from 0.3 per cent in Hungary to 3.6 per cent in Poland, while Romania and the Czechia also continued to expand. Meanwhile, Colliers said the 2026 outlook points to office supply gaps in parts of the region, pressure on prime rents and continued demand in logistics, particularly as infrastructure investment and Asian capital continue to support the industrial market. That is exactly where the old “cheap market” thesis starts to break down. The real question is not whether a market looks inexpensive on paper, but whether occupiers, households and investors can support the next level of rents and prices. The same logic is increasingly relevant for Cyprus and Greece. In Cyprus, Limassol is often described as expensive, and in headline terms it is. But the city’s pricing is not driven by speculation alone. It reflects constrained supply, foreign and local demand, professional services, shipping, technology, business relocation and a resident investor base with genuine purchasing power. The latest sales figures show that demand has not disappeared. But they do not prove that every price is justified. They simply show that the argument has changed. Investors can no longer rely on the easy line that Cyprus remains cheap compared with larger European markets. They now need to show that rents, incomes, occupancy, demand depth and the supply pipeline support the next price level. Older 2025 figures help explain how Cyprus reached this point. PwC Cyprus said the island’s real estate market reached a record €6.5bn in transaction value in 2025, while demand from foreign buyers rose 16 per cent. Paphos, Larnaca and Limassol together accounted for about 80 per cent of the increase in properties acquired by foreigners during the year. The Central Bank of Cyprus (CBC) also pointed to continued pressure in the residential market. Its property index said prices accelerated in the fourth quarter of 2025, driven by strong demand from local and foreign buyers, the gradual rise in supply and elevated construction costs. According to the same index, the overall residential price index rose 7.1 per cent year on year, while apartment prices increased 9.6 per cent. Athens is moving through a similar phase, particularly in prime districts. The newest Bank of Greece figures show that prices are still rising in 2026, even if the pace has moderated. That makes the question more complex. The story is no longer only about recovery from the crisis years. It is about whether prime neighbourhoods, tourism demand, limited stock and improving incomes can continue to support prices that have already moved sharply higher. The pressure is already visible. Reuters reported that rents in Athens have risen by more than 50 per cent since 2019, while Greece faces a shortage of around 180,000 homes in major cities. The report linked the squeeze to years of low construction, short-term rentals and foreign investment. Affordability now matters to investors as much as policymakers. A market can look strong while demand is supported by limited supply or foreign money. But if rents keep moving faster than wages, the next stage of price growth becomes harder to defend. That is why headline comparisons across CEE, Cyprus and Greece are becoming less useful. A cheaper market is not automatically mispriced, just as an expensive one is not necessarily overvalued. The real question is whether the fundamentals are strong enough to carry the market to its next level. That means looking less at the sticker price and more at employment, income growth, rental yields, vacancy, infrastructure, financing costs, construction costs and new supply. That is where the real mispricing will be found, both in markets investors have underestimated and in those where the story has started to run ahead of the numbers.