Real estate prices in Europe have continued their steady upward momentum, along with a slower pace of upward movement by rents. The discrepancy between real estate prices and rental prices in the EU has become quite steep in the past decade.
In particular, the European Commission’s Eurostat research points to a steady increase since 2010, but as home buying prices marched up by 45%, rents, on the other hand, jumped ‘only’ 17%.
The real change in the markets occurred roughly around 2015, when home prices started their climb, shooting past rent prices in Q1 2018, and since then, the house prices haven’t looked back.
Further, house prices jumped by 9.3% in Q2 2022, compared to Q2 2021, and 2.3% compared to Q1 2021, when large spikes in home prices occurred.
Geography-wise, house prices climbed the most in Estonia, Hungary, Luxembourg, Latvia, Lithuania, Czech, and Austria, effectively, doubling. Across 19 EU states, house prices increased more than rents when comparing Q2 2022 with 2010.
Countries in which real estate investors profited the most is Estonia, with an increase of 196%, Hungary 168%, Luxembourg 135%, Latvia 131%, Lithuania and Czechia, both saw 130% increase, and Austria 121%. Decreases, on the other hand, were noted in Greece -23%, Italy -8% and Cyprus -6%.
When it comes to rents, comparing Q2 2022 with 2010, the largest increases were seen in Estonia 214%, Lithuania 139% and Ireland 82%, while decreases were noted in Greece -24% and Cyprus -0.2%.
Increases in housing prices occurred worldwide, not just in Europe, despite the turmoil hanging above the broader markets and various world economies. According to IMF’s Global House Price Index, house prices started their climb in 2020 after Covid 19 pandemic hit.
Owing to these increases, a cost-of-living crisis is emerging, with European governments taking steps to tackle the emergence of this troublesome trend, initially in the energy sector. In general, a potential full-blown cost-of-living crisis could hurt the real estate market, with Germany showing the initial chinks.
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