Real estate prices in Spain look upbeat as the housing market was vigorous again. Despite the slower economic growth, the house price growth was not affected this year. There has been an increase in new mortgages with a weighted average of mortgage rates of 2.6%. According to the European Mortgage Association, the average term of new mortgages increased to 283 months from 277. This facilitated to upkeep the purchasing power of the consumers. ING thinks the growth of house prices will alleviate and forecast 4% in 2020.
Though times are challenging in the Eurozone, there is still a moving growth progression for the real estate market. House prices growth was strong in many eurozone countries in 2018 yet ING forecasts that growth rates will ease this year and in 2020 in most countries.
An example is in France, it has continued to grow in 2018 at a pace of 3%. There is still an ongoing growth of 2.9% for the house prices in the first quarter of 2019. The future looks robust for areas outside of Paris, with house prices growing at a steady of 2.5% in the last two years. While in Paris, there has been a deceleration from 4.7% to 3.9% YoY. The low interest rates are supporting prices, on average of only 17.8% higher than 10 years ago, showing a moderate catch up for the largest urban areas in the country. Because of the rise of an estimated 3% in 2019, ING predicts the price growth could decelerate in 2020 and 2021 together with the economic downturn while enduring well above the rate of inflation.
However, neighboring Portugal’s real estate grew by 10.3% in 2018 due to strong macroeconomic conditions combined with foreign demand. It is expected that the strong price growth will continue at a slightly lower pace of 8% in 2019 and 6% in 2020. Other neighboring countries like Italy shows favorable market conditions because of the low price-to-rent and price-to-income ratios that continue to make the purchase options attractive.
In Germany, property prices and rents have been rising for several years now, but the challenge is the recent caps on rent and new construction of social housing by the government. Their real estate market resulted in some parts of the population unable to afford the price increase of housing rents.
For other eurozone countries, like the Netherlands, it is expected that home sales will continue to decline because of the current price increases due to the tightness of the housing market. ING expects an average price increase of 6.5% in 2019 and 3.0% for 2020. Same with Belgium, the country is forecasted to have a growth of 3.5% in 2019 and 3.0% in 2020 since there have been a good activity and low interest rates for the support the real estate market.
Overall, prospects are still high for the real estate market in the Eurozone, growth has been predicted despite the hurdles due to political developments and marketing conditions, which makes it more attractive to the foreign and local buyers.