Low Lending Rates Continue to Fuel Europe's Housing Market Recovery

S&P Global Ratings
Written By: Sophie Tahiri, Jean-Michel Six, Boris S Glass, Tatiana Lysenko
S&P Global Ratings
Written By: Sophie Tahiri, Jean-Michel Six, Boris S Glass, Tatiana Lysenko

Housing market activity is set to expand in all major European markets this year, fueled by historically low lending rates and gradually accelerating economic growth. We expect housing prices will continue to rise through 2018 because we believe the European Central Bank will maintain ultra-low rates, with no hike before 2019.

We expect Ireland's housing market to experience the strongest year-on-year nominal house prices rises of 8.5% this year and 7% in 2018, underpinned by supply shortages and continuing economic recovery. The Brexit-related relocation to Ireland of some of London's financial sector workers should also support the market. Conversely, we expect price rises to slow in the U.K. to 2.5% overall this year, and to decline by 1% in 2018 on Brexit uncertainties, although still supported by pent-up demand and favorable financing conditions.


  • We forecast residential property prices will rise in all major European markets this year amid accommodative monetary policies and economic growth.
  • The combination of very low borrowing rates and lower prices has boosted the purchasing power of European potential buyers, although to various degrees across the region.
  • We expect the strongest price rises this year will be in Ireland (8.5%), Germany (7.0%), and The Netherlands (7.0%).
  • Italy's housing market is the weakest performer, with forecast price rises of 0.5% after a prolonged period of decline, owing to slow economic recovery.

The German residential property market continues to boom on tight supply and a strong economy, but our forecast of a 7% year-on-year gain is slower than in 2016 as more new construction eases the pressure. The Netherlands' strong housing recovery should also continue this year, gaining 7%, on rising income, supply shortage, and sustained low interest rates.

House price inflation in Portugal and Spain, of 6% and 4%, respectively, are both being aided by foreign buyers.

We expect Belgian house-price growth will be dynamic at 4% this year and 3.5% in 2018 on the back of solid economic performance. But, further ahead, the prospect of gradually rising borrowing rates and a less favorable mortgage tax regime should soften house price rises. In France, rising consumer confidence could lift prices by 2% this year, but they could flatten next year on the back of forthcoming fiscal measures. In Switzerland, high prices and regulatory measures are likely to keep a lid on house price rises (1.3% in 2017 and 1.5% in 2018). Italy is experiencing the slowest price rise among major European markets, at a forecast 0.5% this year, after a prolonged period of decline, due to weak economic recovery.


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