Interest rates and real estate prices: the impact in Europe will last.

'Interest rates will put pressure on house prices in Europe for a long time. This is stated in the report of S & P "European housing markets: we face a long correction". According to analysts Standard & Poor's, the cost of housing will reach its minimum by the end of 2024.

The rating agency believes that rising interest rates in Europe will lead to a long-term correction in nominal housing prices in most countries on the continent. Rising mortgage interest rates are the cause of weakening demand and falling prices, according to S&P. Nevertheless, "potential demand and housing needs in Europe remain strong." According to the rating agency, there are some mitigating factors, the main ones being "the slow transition of problem loans to household balance sheets due to the high share of fixed-rate loans in total volume" and "the continued stability of European labor markets."

Key findings from the report:

• Interest rates are putting pressure on house prices in Europe.
• Housing costs will reach their lowest point by the end of 2024.
• Higher interest rates will lead to a prolonged correction in nominal house prices.
• Rising mortgage interest rates will dampen demand and cause prices to fall.
• Potential demand and need for housing in Europe remains strong.

S&P forecasts a decline in home prices:

• Price reductions will reach around 12% in Germany and the UK.
• Price declines will exceed 8% almost everywhere by the end of 2024.
• In Italy, the correction will be softer, about 6.3% from the peak.

Features of Italy:

Government subsidies for energy efficiency measures have sparked a strong surge in demand at the beginning of this year.

It is expected that this surge in demand will taper off by mid-2025.

Price correction in Italy will be postponed and less pronounced compared to other countries.

Forecasts for the future:

S&P forecasts a decline in housing prices in various European countries during 2023-2025.

A prolonged price correction is expected due to rising interest rates and other factors.

A sharp increase in housing prices after the correction is unlikely.

Housing prices will continue to be affected by the rising costs of borrowing in real terms.