Determinants of Rent Prices: An Analysis of European Cities

Abstract Using the data of a sample consisting of 99 cities from 37 European countries (2024) this paper discusses the determinants of rent prices. The results indicate that rents are lower in areas with longer commute times and higher cost of living index, while high wages and high house price to income ratio (HPIR) lead to increase rent prices. In this paper, we constructed the Rent Index as average of four variables relating to the rents of one-room and three-room apartments in the city centre and in the suburbs. We identify the factors that explain the variation of the Rent Index using multiple linear regression. The overall conclusions of analysed models are mixed: salary is the strongest predictor in all models, if the city is a university one, we expect an average rent increase between 105.9 and 115.81 euro compared to non-university cities. If the city has a tourist attraction, the rent price will increase on average with a sum between 114.59 and 158.61 euro; the safety index and pollution index have significant effects on Rent Index; an increase of HPIR by one unit will lead to an increase in the Rent Index with 13.6 euros per month.