The Strategist

S&P names leaders in the growth of housing prices in Europe in the next three years

02/22/2018 - 14:11

The supply shortage will help to maintain the growth dynamics in some markets, especially in Portugal and the Netherlands. Along with Ireland, there will be a rise in price of real estate in 2018, according to the report of S&P.

The company predicts that most countries will see a rise in housing prices in 2018, 2019 and 2020, but to varying degrees. It is expected that the increase in value will be the highest in Portugal and Ireland in the current year - by 8.5%, and by 7% in the Netherlands. It is also assumed that housing will rise in price by 3.5% in Spain, 3.4% in Belgium, 3% in Germany, 2% in France, 1.8% in Switzerland, 0.6% in Italy and 0.5% in Great Britain, PropertyWire reports.

In 2019, Portugal is likely to lead the list of countries with a rise in house prices by 7%. It will be followed by Ireland (6%), the Netherlands (5.3%), Spain (3%), Germany (2.7%), Belgium and France (2%), Switzerland (1.9%), Italy and the United Kingdom (1.5%).

In the long term, until 2020, annual real estate prices are expected to increase by 6% in Portugal and Ireland, by 3.6% in the Netherlands, by 3.5% in the UK, as the expected effect from Brexit is decreasing. Further, there will be an increase of 3% in Spain, 2.5% in Germany, 2.3% in Switzerland and 2% in Belgium, France and Italy.

The report shows that the Belgian market will soften due to a deterioration in housing affordability and a slowdown in demand due to the fact that new jobs will not appear so actively. Also, the less favourable mortgage lending regime and the growth of interest rates will play its role.

After an exceptionally strong 2017, the French market will also slow down due to reduced availability. In the 12 months to October, the deals reached a record level of 958,000, which is 15.6% higher than the same month in 2016. However, the prices will continue to grow, although more slowly and mainly in the largest cities of the country, such as Paris.

In the UK, the market will suffer from Brexit, high stamp duty on additional real estate and less favourable tax treatment for landlords. The report says that activity in the country's housing market continues to decline, and only a few types of real estate support prices, while accessibility will remain extremely tense in some areas, especially in London.

Despite the dynamic economy, the report predicts that a slowdown in demand in Germany could lead to a moderate increase in the cost of housing, while the property deficit will maintain high prices in Ireland. In Italy, the gap between supply and demand should gradually decline, which will further reduce the time of sale and price discounts and, ultimately, the rise in price of property.

In the Netherlands, supply shortage and rapid economic growth will continue to fuel a strong growth in housing construction. A similar forecast has been made for Portugal, where sustained economic growth, a rapidly improving labour market, the interest of foreign investors and the lack of supply will remain the basis for rising house prices.

Strong economic conditions will also benefit the housing market in Spain and will propel high sales volumes, helping to reduce the stock of unsold homes, according to the report. And it is expected that a stronger economy and lower interest rates in Switzerland will support the market activity. However, regulatory measures, low availability and slowing down of net migration are holding back prices.