Europe’s living real-estate market has entered a period of renewed stability in 2025, and institutional investors now have a clearer way to monitor its trajectory. INREV, the European Association for Investors in Non-listed Real Estate Vehicles, has introduced the INREV Living Fund Index — the first dedicated benchmark capturing the performance of rental housing, student accommodation, senior living and newer beds-based formats such as single-family rental and flexible living.
The launch fills a long-standing gap. Although the living sector has become Europe’s largest property investment segment in recent years, it lacked a unified reference point for measuring performance. With the market emerging from a two-year, rate-driven correction, investors are seeking greater transparency on where returns are stabilising and which strategies are outperforming.
What the New Index Covers
The INREV Living Fund Index includes 41 commingled, non-listed funds with a combined €60.4 billion in gross asset value. Its historical dataset extends back to 2001, offering insight into multiple cycles, from rapid rent growth to valuation compression and demographic change. For pension funds and insurers with large residential allocations, access to long-term, comparable performance data marks a significant shift.
The index tracks quarterly net asset value returns and breaks down performance by strategy type and sub-sector, including residential, student housing and senior living. This provides a clearer picture of how different risk profiles behave under shifting market conditions.
Q3 2025: Early Signs of Stabilisation
The inaugural results for Q3 2025 show that the sector has entered a more balanced phase after several quarters of volatility. The index reported a total return of 1.8 percent, compared with 1.9 percent in Q2. While the quarterly change is modest, it indicates that valuations have stopped declining at the pace seen in 2023 and early 2024.
Rental growth remains the primary performance driver. Across Europe, housing shortages, wage-linked rental formulas and demographic pressure continue to support steady tenant demand. With development constrained by high financing costs and strict planning regimes, vacancy levels in most major cities remain low.
Northern Europe Remains the Strongest Performer
Among the best-performing regions are the Netherlands and the broader Northern European markets. Dutch-focused funds delivered 2.4 percent for the quarter, supported by exceptionally strong demand, limited new construction and high occupancy across regulated and free-market rental segments.
The Netherlands’ heavy representation within the index highlights how concentrated institutional capital has become in supply-restricted markets. These dynamics help soften the impact of elevated borrowing costs and maintain stable cash flows for core investors.
Core Strategies Lead Value-Add
Core residential funds reported 1.9 percent, outperforming value-add strategies, which remain more exposed to refinancing pressure, capex inflation and development delays. Over the past 18 months, many managers have shifted toward lower-risk portfolios, and the index shows that investors continue to prioritise stability, predictable rents and low leverage in the current rate environment.
Value-add strategies still attract interest for medium-term repositioning, but higher debt costs have reduced returns for assets requiring refinancing or refurbishment.
Student Housing: Strong Demand, Softer Valuations
Student housing posted 0.9 percent, a softer quarterly result but still positive. Operators across Europe continue to report near-full occupancy and another year of rental growth ahead. In markets such as the UK, the Netherlands, Spain and Poland, institutional landlords expect rent increases of around 4 percent for the next academic cycle.
Despite this strong demand, the segment has undergone more pronounced valuation adjustments following rapid expansion and rising operating expenses. The softer index performance reflects a market recalibration rather than any weakness in fundamentals.
Emerging Formats Gain Institutional Attention
The index also underscores growing institutional interest in emerging residential formats, including single-family rental, flex living and senior-living concepts designed for ageing populations. These formats offer diversification and scalable income streams aligned with the long-duration liabilities of pension funds and insurers.
Although still smaller in volume, these segments are expanding rapidly and are expected to account for a larger share of the index over time.
Transparency and Market Discipline
A key benefit of the index is the transparency it brings to a sector that has grown quickly without consistent benchmarks. Investors can now identify whether their portfolios are outperforming the market, compare geographies and assess differences between core and value-add profiles.
For fund managers, the index introduces clearer performance discipline. It may influence fee structures, risk positioning and fundraising strategies as investors increasingly benchmark managers against a recognised market reference.
Europe’s Housing Shortage Drives Resilience
Europe’s chronic housing shortage remains the central driver of the sector’s resilience. Developers continue to face high construction costs, limited land supply and restrictive planning regimes, while demand rises in major metropolitan hubs. As a result, the living sector has outperformed offices, retail and several alternative commercial segments through the recent interest-rate cycle.
Office markets are still grappling with hybrid work, retail is stabilising slowly and logistics is adjusting after years of exceptional growth. In contrast, residential assets benefit from consistent occupancy and inflation-linked rental updates.
What Comes Next
The launch of the INREV Living Fund Index marks a strategic moment for Europe’s residential real-estate market. With early 2025 data showing stabilisation and moderate growth, the index offers a critical tool for investors navigating a complex environment shaped by high rates, limited supply and sustained rental pressure.
As interest rates are expected to gradually decline over the coming quarters, financing conditions may improve. Strong demand, constrained supply and durable income fundamentals suggest that living strategies will continue to outperform many commercial asset classes.
