While all Eurozone economies saw major contractions in economic activity in 2020, the impact on residential real estate prices was diverse, according to a new report from ING called Eurozone Quarterly: Still in lockdown blues.
Some countries saw growth slowing down while others saw it accelerate. Below is brief summary of the report’s findings for some of the countries in the Eurozone.
Germany: Prices set to increase further
House prices in Germany don’t seem to be showing any signs of levelling off. The most recent year-on-year data from the statistical office’s house price index showed a 7.8% rise, which was the highest since 2016. The increase was driven mainly by existing house prices, primarily in cities with limited space for new construction. Speculation that the pandemic could slow down or even reverse house price growth has failed to materialise. ING stated: ‘With record levels of savings, amassed mainly by affluent consumers, and low-interest rates, prices look set to increase further.’
France: Property prices to rise by 1.5% to 2%
In 2020, the French residential property market remained buoyant despite the lockdowns and the 12-week ban on property visits. Prices increased by 4-5% over the year, however, the momentum could slow down in 2021 as the delayed effects of the crisis are felt, particularly on the labour market and household purchasing power.
At the same time, the supply of new housing is likely to be under pressure as a result of the construction sector closing down during the first lockdown and the fall in productivity in 2020. This is likely to put pressure on new house prices, especially as new environmental regulations come into force this year and increase construction costs.