EU: Quarterly House Prices fall for the first time since 2015



The latest figures from Eurostat, the EU's statistical office, have revealed that house prices in the EU fell by 1.5% in the last three months of 2022, marking the first quarter they have fallen since 2015.

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The latest figures from Eurostat, the EU's statistical office, have revealed that house prices in the EU fell by 1.5% in the last three months of 2022, marking the first quarter they have fallen since 2015. The decline in property prices was seen across 15 of the bloc's 27 member states, with Denmark and Germany experiencing the largest declines of 6.5% and 5% respectively. The trend towards lower house prices is being driven by higher interest rates and rising living costs, which are deterring many Europeans from buying homes and causing a sharp drop in demand for mortgages.

Recent data shows that the fall is likely to continue into 2023. For example, Dutch house prices fell by 1.5% between January and February, according to data from the CBS national statistics agency. However, there are still some bright spots, such as Croatia, where increased demand from foreign buyers drove house prices up by 4.7% in the final quarter of last year.

EU: Quarterly House Prices fall for the first time since 2015

The shift from rising to falling property prices is a significant change from the trend of the last decade, but it is not entirely surprising given the actions of central banks. The European Central Bank (ECB) and other central banks have been hiking rates, which has led to a reduction in demand for mortgages and a consequent drop in house prices. Last month, the ECB raised the deposit rate by 0.5 percentage points to 3%, taking borrowing costs in the euro area to their highest level since the 2008 financial crisis.

Banks have also tightened credit conditions in response to the market changes. The collapse of Silicon Valley Bank in the US and the forced acquisition of Credit Suisse by UBS may lead to even more aggressive tightening of credit conditions. This has led to a decline in total bank lending to euro area customers for a third straight month in February, bringing the three-month total decline to €72 billion, putting an end to nearly five years of steady growth.

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The UK and Sweden have been hit particularly hard by the property market downturn, with house prices falling by 0.8% and 15% respectively between February and March. This extended the UK's slump in house prices since last summer and resulted in a drop of 3.1% year-on-year, the biggest decline since 2009. The Swedish housing market suffered even more significant damage, with a 0.8% monthly fall between February and March and a 15% decline in 2022.

The drop in house prices across the EU is a significant shift from the upward trend of the last decade. But with central banks continuing to raise interest rates, this downward trend is likely to continue. While there are still some bright spots in the property market, it appears that many countries will face falling house prices for the foreseeable future.

EU: Quarterly House Prices fall for the first time since 2015

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