European Property Market in Turmoil: House Prices Plunge for the First Time in Decades

The European Property Market is in turmoil as house prices took a plunge for the first time in decades. Find out more about the decline and what it means for homeowners and investors.

House prices in the euro area and the European Union (EU) have experienced a decline in the second quarter of 2023, according to data released by Eurostat. Compared to the previous year, house prices fell by 1.7% in the euro area and 1.1% in the EU. This indicates a change in the trend of the European property market, where houses are currently cheaper on average than they were last year. However, there are signs in the quarterly numbers that this decrease might not last long.

European Property Market in Turmoil: House Prices Plunge for the First Time in Decades | ogusyis

The latest numbers from Eurostat reveal that European house prices have fallen year-on-year for the first time since 2014. The House Price Index fell by 1.7% in the euro area and 1.1% in the EU between April and June, compared to the same quarter of the previous year. This follows a slight increase of 0.4% and 0.8% in the euro area and EU, respectively, during the first three months of this year.

Although the overall annual trend shows a decline, a quarter-over-quarter analysis reveals a different picture. House prices saw a slight increase of 0.1% in the euro area and 0.3% in the EU between April and June 2023. This rise comes after two consecutive quarters of decline, with a decrease of 1.4% in the fourth quarter of 2022 and 0.7% in the first three months of this year. It appears that the second quarter of 2023 brought some relief to the European property market, signaling a potential turnaround.

Among the EU countries, there are significant variations in house prices. Nine countries experienced lower prices in the second quarter of 2023 compared to the previous year, while prices continued to rise in the other 17 member states. Germany witnessed the sharpest annual decrease with a decline of 9.9%, followed by Denmark at 7.6% and Sweden at 6.8%. On the other hand, Croatia registered the largest increase with a rise of 13.7%, followed by Bulgaria at 10.7% and Lithuania at 9.4%.

While house prices show some fluctuation, rents in the EU have been steadily increasing. In the second quarter of 2023, rents rose by 0.7% compared to the previous three months. On an annual basis, rents were on average 3% more expensive than during the same period of the previous year. This upward trend in rents has been consistent, with a 2.5% increase in the last quarter of 2022 and a further surge of 2.9% in the first quarter of 2023.

According to Eurostat, between 2010 and the second quarter of 2023, house prices in the EU have seen a significant increase of 46%, while rents have gone up by 21%. When comparing the second quarter of 2023 with 2010, house prices have risen more than rents in 20 out of the 27 EU countries. Estonia, Hungary, Lithuania, Latvia, Czechia, Luxembourg, and Austria saw house prices more than double during this period. However, Greece, Italy, and Cyprus experienced a slight decrease in house prices. As for rents, prices increased in 26 EU countries, with Estonia (+208%) and Lithuania (+168%) observing the highest rises. The only exception was Greece, where rent prices decreased by 21%.

In conclusion, the European property market has witnessed a decline in house prices in the second quarter of 2023. Although the overall trend shows a decrease compared to the previous year, there are indications that prices might be stabilizing, as quarterly numbers reveal slight increases. Moreover, the variations across EU countries highlight a diverse landscape in terms of price fluctuations. Meanwhile, rents continue to rise steadily, showcasing an upward trajectory. These developments in the housing market signify important considerations for buyers, sellers, and renters across Europe.