Propertiso Research Report 2026

How Affordability, Migration, and Structural Shifts Are Redefining Real Estate Demand Across Europe

For decades, European real estate investment has been heavily concentrated in a relatively small number of global cities. London, Paris, Berlin, Madrid, and a handful of other metropolitan centers have absorbed the majority of capital flows, driven by liquidity, international demand, and economic scale.

However, the period between 2020 and 2026 has marked a significant structural shift in this pattern. Secondary cities—mid-sized urban centers with growing infrastructure and economic activity—are emerging as increasingly attractive destinations for both residential demand and investment capital.

This shift is not simply cyclical. It reflects deeper changes in affordability, mobility, and how people choose to live and work. As price levels in primary cities have reached structural limits relative to income, demand is being redistributed across the urban hierarchy.

In 2026, secondary European cities are no longer peripheral markets. They are becoming central to the next phase of real estate growth.

1. From Capital Concentration to Demand Redistribution

Historically, the dominance of primary cities in Europe was driven by a combination of factors. These cities offered the highest levels of economic activity, employment opportunities, cultural infrastructure, and global connectivity. For investors, they also provided liquidity, transparency, and relatively predictable long-term performance.

As a result, capital concentration became self-reinforcing. Higher demand drove prices upward, which in turn attracted more investment, both domestic and international.

However, this dynamic has gradually reached its limits.

Price-to-income ratios in major European cities have increased significantly over the past decade, reducing affordability for local buyers and limiting future growth potential. At the same time, rental yields have compressed, making these markets less attractive from an income perspective. This has created a structural imbalance: demand remains strong, but the ability to absorb that demand within primary cities has weakened. The natural consequence is redistribution. Buyers, renters, and investors are increasingly looking beyond traditional hubs, seeking markets that offer a better balance between price, quality of life, and long-term potential.

2. The Affordability Constraint as a Primary Driver

Affordability is the single most important factor behind the rise of secondary cities.

In many major European capitals, housing costs have significantly outpaced wage growth. This has led to a situation where a large portion of the population is effectively priced out of ownership or forced into long-term renting under increasingly constrained conditions. For both domestic buyers and international investors, this creates a clear incentive to explore alternative markets. Secondary cities offer:

• Lower entry prices
• More favorable price-to-income ratios
• Higher rental yields
• Greater upside potential

These characteristics are particularly attractive in a post-boom market, where capital efficiency and income generation have become more important than speculative appreciation. Over time, even small differences in entry price can translate into significant differences in long-term return, especially when combined with rental income.

3. Remote Work and the Geography of Demand

The widespread adoption of remote and hybrid work models has fundamentally altered the relationship between employment and location. Before 2020, proximity to the workplace was one of the primary determinants of housing demand. Living close to central business districts was often a necessity, not a choice. This constraint has weakened. By 2026, a growing share of the workforce has at least partial flexibility in where they live. This has allowed individuals and families to prioritize other factors, including:

• Quality of life
• Cost of living
• Access to nature
• Climate
• Housing space and comfort

Secondary cities, particularly in Southern Europe, have benefited significantly from this shift. Cities such as Valencia, Malaga, and Porto offer a combination of lifestyle advantages and affordability that is difficult to replicate in larger metropolitan areas. This trend is not limited to international buyers. Domestic migration within countries is also contributing to demand redistribution, as residents move away from expensive capitals toward more balanced regional centers.

4. Infrastructure and Connectivity as Growth Enablers

Infrastructure investment plays a critical role in transforming secondary cities into viable alternatives to primary urban centers. Improved connectivity—through high-speed rail, expanded airports, and digital infrastructure—reduces the practical disadvantages of living outside major cities. Travel times shrink, access to employment markets improves, and integration with national and international networks becomes more seamless. At the same time, many secondary cities are investing heavily in urban development. Public spaces, cultural amenities, education systems, and technology hubs are being upgraded to attract both talent and capital.

These investments create a positive feedback loop. As infrastructure improves, demand increases. As demand increases, further investment becomes viable. Over time, this process can significantly narrow the gap between primary and secondary cities in terms of attractiveness and functionality.

5. Rental Markets and Yield Dynamics

One of the most compelling arguments for investing in secondary cities is the difference in rental yield. In primary cities, high acquisition costs often result in relatively low yields. While these markets offer stability and long-term appreciation, income generation can be limited. In contrast, secondary cities typically provide:

• Lower purchase prices
• Comparable rental demand
• Higher gross yields

This is particularly important in the current market environment, where rising interest rates have increased the cost of financing. Investors are placing greater emphasis on cash flow and income stability. In many cases, secondary cities offer a more balanced investment profile, combining moderate price growth with stronger income performance. This dynamic is attracting not only individual investors but also, increasingly, institutional capital.

6. The Institutional Shift

Institutional investors have traditionally focused on major cities due to their scale, liquidity, and transparency. However, as yields in these markets have compressed, the need for diversification has become more pressing. By 2026, a noticeable shift is underway.

Secondary cities are becoming more investable at scale, supported by improved data availability, stronger local economies, and increasing transaction volumes. While these markets may still lack the depth of primary cities, they are no longer considered niche. Importantly, institutional capital tends to follow rather than lead demand. Retail buyers and smaller investors often identify emerging opportunities first. Once a market demonstrates consistent growth and liquidity, larger players begin to enter. This pattern is now visible across multiple European regions.

7. A Framework for Evaluating Secondary Cities

To better understand which secondary cities are likely to outperform, it is useful to consider a structured framework. The Secondary City Growth Index 2026 (SCGI-26) evaluates markets based on five key dimensions:

• Affordability gap
• Population growth
• Rental yield
• Infrastructure investment
• Economic diversification

Cities that score highly across these dimensions tend to exhibit stronger long-term performance. They combine demand drivers with supply constraints and institutional viability. This type of framework is essential in a fragmented market environment, where performance can vary significantly between cities.

8. Regional Patterns and Emerging Hotspots

The rise of secondary cities is not uniform across Europe. Different regions exhibit distinct patterns. Southern Europe stands out due to its combination of climate, lifestyle appeal, and relatively lower price levels. Cities in Spain and Portugal, in particular, have seen strong international demand.

Central and Eastern Europe offer a different dynamic, driven by economic growth, urbanization, and convergence with Western European income levels. Here, secondary cities often benefit from rapid development and increasing investment flows. Western Europe presents a more mature landscape, where opportunities are more selective but still present, particularly in well-connected regional centers. Understanding these regional differences is critical for identifying the most promising markets.

9. Risks and Structural Limitations

Despite their growing appeal, secondary cities are not without risk.

• Lower liquidity compared to major capitals
• Infrastructure gaps in some locations
• Overheating in high-demand cities
• Dependence on tourism or remote work trends

Investors must balance opportunity with caution, using data and structured analysis rather than relying solely on narrative.

The rise of secondary European cities represents one of the most important structural shifts in the real estate market today. Driven by affordability constraints, changing work patterns, and infrastructure development, demand is becoming more distributed across the urban landscape. This redistribution is creating new opportunities for investors, developers, and agencies willing to look beyond traditional markets. However, success in this environment requires a more analytical approach. Not all secondary cities will perform equally, and understanding local dynamics is essential.

The key insight for 2026 is clear:

Growth in European real estate is no longer concentrated in a few global capitals.
It is increasingly spread across a wider network of cities—each with its own drivers, risks, and potential. Identifying the right ones is now a strategic advantage.