Home prices across Europe are entering a measured correction that could span several years. In the latest estimation from Standard & Poor’s, two of the world’s leading rating agencies project a modest decline: about 2.5% in 2023 followed by roughly 1% in 2024. Sylvain Broyer, chief economist for Europe, the Middle East, and Africa at S&P Global Ratings, notes that even though values will ease, they are not anticipated to crash in most European markets within 2023, with some countries seeing steadier or even rising prices in 2024. The sense among analysts is that meaningful price increases may not resume robustly until 2025, if at all, in several economies.
What is driving this expected shift? The abrupt tightening of monetary policy by central banks has boosted borrowing costs, pushing mortgage rates higher and adding pressure to housing affordability. One expert from S&P summarizes the situation: the market needs time to adjust to higher interest rates overall, and the pace of adjustment will vary by country. The forecast suggests a gradual recalibration rather than a sudden shift, with a potential multi-month period before buyers and lenders settle into a new normal.
Looking for reasons to stay optimistic? The same report highlights several stabilizing factors that historically help cushion housing markets when prices dip. European housing has often shown resilience on the downside, supported by persistent demand and limited supply. A strong labor market, rising household well‑being, and evolving preferences may moderate the impact of higher borrowing costs. In short, the market’s downside sensitivity appears constrained by fundamentals, even as borrowing costs remain elevated.
Geographic nuances also feature prominently in the projections. Portugal is expected to experience the steepest decline among the major markets studied, with an anticipated drop around 4.4%. Spain mirrors this trend in magnitude, while the Netherlands is forecast to fall by about 2.5%, and Sweden by roughly 2.2%. Belgium, Ireland, and Germany are all projected to see declines near the 2% mark. On the other hand, the outlook for 2024 points to stability or modest gains in most of these countries, with a few exceptions where Germany, Belgium, and Spain may still show softer performance. By 2025, the consensus across the analyzed European economies leans toward stabilization and potential upticks, underscoring a cautious but hopeful path for housing markets in the region. [Citation: S&P Global Ratings]