Everywhere in Europe, it’s the end of an era. After several years of sharp price increases and almost zero interest rates, the european real estate market enters a reversal phase. This is what emerges from the latest study conducted by the Aviv group, of which SeLoger is a part, which establishes an inventory of the sector in France, Germany and Belgium.
As a result of the exceptional rise in the key rates of the European Central Bank (ECB) in 2022, mortgage rates have increased in all euro zone countries. In January, they reached 4% in Germany and 3.4% in Belgium, causing a fall in the monthly volume of real estate loans granted by 40% and 26% respectively. In a survey published on 11th January, the economic analysis agency S&P finds rates exceeding 3.5% in Sweden and 3% in the United Kingdom.
France is the country that is doing the best
In this register, France is the country that is doing the best, with an average credit rate of 2.5% at the start of the year and a volume of loans granted down “only” 12%. “We complained a lot about wear rate [qui fixe le taux maximal auquel les banques sont autorisées à prêter]but it is clear that this mechanism has protected households from a sudden change in trend”judge Barbara Castillo-Rico, head of economic studies at Aviv.
State of play of the real estate market in France, Belgium and Germany. Source: Aviv.
© The JDD
In fact, the French market has maintained good momentum, with prices up by 4.6% in 2022, although the market has slowed down in the second half of the year, particularly in major cities (Bordeaux, Lyon, etc.). Despite the growth in rates, Belgium also saw the value of properties for sale climb by 3.6% in one year, with increases noted in all the cities studied. “The country has the particularity of indexing household wages to inflation, which protects their purchasing power”, recalls Barbara Castillo-Rico. Signs of a slowdown were, however, observed in the last quarter, which is usually a calmer period for transactions in Belgium.
Further interest rate hikes to come
In Germany, the decline is already there. On average, prices there fell by 0.7%, with changes observed from the second quarter. All the big cities are struggling. In Munich, prices fell by 5.6%, to 9,080 euros per square meter; in Frankfurt, the decline is 4.7%, to 6,173 euros per square meter. Berlin is still resisting, with almost stable prices (-0.6%).
“We think that the decline will continue this year, with a peak of -5% during 2023”says Sylvain Broyer, chief economist of S&P for the Europe region. But what will keep the market from collapsing is the country’s demographics. » Germany has in fact taken in more than 1 million Ukrainian refugees, pushing up demand for housing. And the supply is lacking: Germany would need 700,000 additional homes, which prevents prices from falling sharply.
Despite news interest rate hikes future home loans, the collapse of the European market will not take place. “The interest rate is not the only determining factor, recalls Sylvain Broyer. Labor is the first factor that a bank looks at when granting credit. However, in Europe, the labor market is doing very well. We are almost at full employment and growth forecasts for the coming years are better than expected. »