How are the pandemic and the economy affecting the housing market in Europe?

Deloitte and its real estate market research

The international consulting and auditing company Deloitte presented the 11th version of its important research called Property Index, which focuses on the analysis of market trends in residential real estate across Europe. This report is in high demand among potential property buyers as well as major public and private organizations due to its detailed information and accurate data. In this article, we will discuss the key findings and facts from this study.

Rising prices for new buildings

The results presented in the study indicate that Prague has experienced a significant increase in prices of new buildings - by20.13%per year (period from 2020 to 2021). This puts Prague in first place among European capitals in terms of apartment price growth. In the UK, the price per square meter in new residential properties reaches a value of approx.€4,905This makes it the leading country in terms of housing costs on the continent. In the context of housing affordability, it is worth noting that in Bosnia and Herzegovina the average price per square meter in new buildings is only€974This makes this country the most budgetary among the regions considered in the report.

The most expensive cities to buyreal estate

It is also worth mentioning that Paris, as the capital of France, has been recognized as the most expensive city in Europe to buy a new property, ahead of major cities such as Munich, London and Oslo. Average rental rates in the French capital are as follows€29per square meter, which puts Paris at the top position among European cities in terms of rental cost. Interestingly, Berlin, the capital of Germany, was the only city among the capitals where the average price of new buildings remained stable compared to the previous year.

Purchasing power

If we look at purchasing power, in the Czech Republic a resident will need to spend13 years and three monthsto save up to buy an apartment70 square meters. This is the longest term required among all European countries.

Economic context

The economic context also plays an important role in changes in the real estate market. Over the past six years, the euro area economy has enjoyed dynamic growth since the sovereign debt crisis in 2012-2013. However, the positive momentum was disrupted by the COVID-19 pandemic. In 2020, there was a sharp decline in gross domestic product (GDP) by6.6%which particularly affected Spain and Italy.

Economic recovery

The eurozone economy started to recover with growth in 20215.4%. However, despite the rapid rebound, indicators are still below pre-pandemic levels. The recovery took place against a backdrop of disruptions in global supply chains, which also contributed to higher prices for construction materials and commodities.

Predictions for the future

The International Monetary Fund (IMF) predicts that this year the eurozone economy will grow by2.8%. However, there are concerns that dependence on Russian gas supplies may have a negative impact on the economic situation in Europe, given the current events in Ukraine and the sanctions imposed on Russia, which creates a risk of recession.

Influence of inflation

To summarize, the combined effect of supply chain disruptions, the energy crisis and higher commodity prices contributed to accelerating inflation. In April, the inflation rate in the euro area rose to7.5%in year-on-year terms, and by July had already reached8.9%This is the highest level in recent years.

Relevance of inflationary processes

Expectations of accelerating inflation are becoming increasingly urgent.

Conclusion

In conclusion, it is worth noting that the Deloitte study conducted as part of the Property Index provides valuable insights into the dynamics of the residential real estate markets in Europe and helps us better understand how various economic factors influence these markets. It is undeniable that the rising housing prices in countries like the Czech Republic and the United Kingdom, the differences in the average cost per square meter, as well as instances of price stabilization, such as in Berlin, reflect not only the changing conditions in the market but also the economic realities that we all will have to face.

The influence of macroeconomic factors

Among the listed factors, the influence of macroeconomic conditions stands out, particularly economic growth, inflation rates, and changes in interest rates.COVID-19 pandemicThe subsequent economic fluctuations have created a unique situation that requires us to be flexible and ready to adapt to new conditions. Moreover, the consequences of the energy crisis and the unstable geopolitical situation, such as the situation with Russian gas, could exacerbate the market conditions and lead to unpredictable outcomes.

Important observations

• Housing pricesIn the Czech Republic and the United Kingdom, there is a rapid growth being observed.
• Price stabilization inBerlintalks about possible changes in market dynamics.
• Macroeconomic conditions, such asinflationChanges in interest rates play a key role in the housing market.
• Uncertainty associated withenergy crisismay negatively impact the real estate market.

Conclusion

Thus, I have come to the conclusion that careful study of trends in the real estate market is not just necessary, but essential. This can help not only potential buyers but also investors and government agencies in developing strategies aimed at addressing housing policy issues and market stability. Undoubtedly, each region has its own nuances, and understanding these differences will contribute to more informed decisions in the future.