Home prices are facing a two-year correction. According to the latest estimation report of Standard & Poor’s, one of the two largest rating agencies in the world; prices will fall by 2.5% in 2023 and by 1% in 2024. At the European level, Sylvain Broyer, chief economist for EMEA at S&P Global Ratings, confirmed that “home prices will fall, but not crash, by 2023 in most countries in the region and by 2024 in others.” The economist believes that there will not be a strong increase in prices until at least 2025.
Why will this happen? Central banks’ sharp rise in interest rates has had a direct impact on the cost of debt and, with it, the volatile mortgage rates. “It will take time for the market to get used to it. higher interest rates altogether, and some countries will take longer than others,” points out from S&P. It may take ten months for the market to adjust.
As a positive catalyst, the agency said, “The past has shown that housing prices in Europe are highly inelastic on the downside and there are strong drivers present such as limited supply, a strong labor market, high household well-being, and what appears to be changes in preferences— may reduce the effect of the increase. interest rates”.
The country where housing will fall the most will not be Spain. Standard & Poor’s forecast for Portugal fell 4.4%. In line with Spain, prices will fall by 2.5% in the Netherlands, 2.2% in Sweden and 2% in Belgium, Ireland and Germany. Looking to 2024, prices will remain stable or rise in all countries except Germany, Belgium and Spain. until 2025 Agency forecasts increases for all analyzed European countries.