In Europe, residential markets are following divergent trajectories as the impact of rising interest rates hits hard in some areas, while a lack of supply and problems inherited from the financial crisis support others.
Housing prices were also influenced by the pandemic, with lockdowns encouraging people to move to larger homes. Also, some governments have implemented incentives in the sector to support their economies, writes Bloomberg, quoted by ZF.
Vienna recently became the weakest residential market among the major European capitals, suffering a double-digit decline. In contrast, Madrid, Milan and Zurich recorded increases.
In the Austrian capital, tighter mortgage rules are exacerbating the decline. Further declines are anticipated.
The end of the era of cheap money generated strong turbulence in the European residential markets. Interest rate hikes by central banks have made mortgages more expensive even at a time when a cost-of-living crisis is putting pressure on consumers. However, the impact of the credit increase is uneven.
Areas affected by the global financial crisis have been less affected by the current crisis, while cities that have seen growth based on cheap debt suffer more.
Sweden’s penchant for shorter-term loans has made the country particularly vulnerable to rising interest rates. Housing construction will probably collapse as a result of falling prices, putting heavy pressure on the Nordic country’s economy, warned Nordea Bank in a recent report.
In Germany, the crisis in the residential sector is expected to continue, notes The Local. Europe’s biggest economy needs new housing, but fewer apartments are under construction today than at any time in the last 16 years.
Investments in the eurozone residential sector are expected to be affected by the tightening of monetary policy despite recent resistance, according to a recent European Central Bank report, according to Bloomberg.
Although the impact of the credit increase was less pronounced than in the US, “the negative effects of the tightening of the monetary policy will probably intensify over time”, indicate the bank’s researchers.
In the US, prices on the residential market recorded the strongest decline in the last 11 years in April, but sales remained at a low level, according to CNN.
Sales had increased in February after a full year of declines due to rising mortgage rates, but the trend was not sustained.
In addition to rising interest rates, low housing stock is also keeping sales low. Mortgage interest rates resumed their rise last week after falling for two weeks in a row.
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