First drop in European housing prices in 10 years

Despite a slight increase in the second quarter, housing prices in the European Union (EU) have recorded their first annual decline in nearly a decade. According to data released by the European Statistical Office (Eurostat), housing prices in EU member states, despite interest rates, high inflation, and weakening economic growth, rose by 0.3 percent in the second quarter of this year compared to the first quarter. However, prices in the 27 member states had fallen in the previous two quarters as rising mortgage rates and the increasing cost of living deterred many people. Accordingly, housing prices fell by 1.1 percent across the EU and 1.7 percent in the eurozone compared to the previous year, marking the first annual decline since 2014.

The decade-long rise in housing prices has come to an end as banks increased mortgage rates and tightened lending criteria following the interest rate hikes implemented by the European Central Bank (ECB) as part of its tight monetary policy since last year. Prolonged negative interest rates and the ECB's bond-buying programs, which pushed mortgage rates to near-zero levels in many countries, had previously fueled the rise in housing prices. Before the decline in prices began, housing prices across the EU had risen by an average of 50 percent since 2015. Some EU countries, including Germany, are experiencing difficulties in the construction sector, affected by sharp increases in construction materials and labor costs, canceled projects, and bankruptcies of real estate developers.

The largest annual declines in housing prices occurred in Germany at 9.9 percent, Denmark at 7.6 percent, and Sweden at 6.8 percent. The largest increases were recorded in Croatia at 13.7 percent, Bulgaria at 10.7 percent, and Lithuania at 9.4 percent.

News Source: 12punto