Housing prices will decline in almost all major markets in Western Europe this year due to the economic effects of the covid-19 pandemic, according to a report by S&P Global Ratings. The risk rating agency forecasts a decrease of between 3% and 3.5% in Spain and shows Switzerland as the only market where prices will continue to increase this year.
S&P expects markets to recover faster than anticipated. In fact, the risk rating agency expects that by 2022 all markets except one should return to relatively strong house-price growth. Large-scale job support plans implemented by governments across Europe will contain rising unemployment rates and therefore, the fall in house prices.
The rapid action of the European Central Bank (ECB) has limited the deterioration of credit conditions. S&P notes that it expects monetary policy to remain extremely loose across Europe for several years, translating into ongoing low mortgage rates and underpinning the housing market during the recovery.
Finally, the report states, that while many households are experiencing a dramatic fall in incomes, they expect the magnitude of lower household spending as a result of the enforced lockdown to outweigh the impact on their overall spending. Not only are people not dining out or going to concerts, they are also not buying new homes. As a result, households are currently accumulating large savings, which should help underpin the recovery of the economy and the housing market once virus-containment measures are lifted further and economies start gradually returning to a semblance of normality.
Click here to read the full report from S&P Global.