European house prices log first annual fall since 2014

Receive free updates on European house prices

we will send you myFT Daily Digest Email summary of latest news European house prices There is news every morning.

Despite a slight recovery in the three months to June, house prices in the European Union still recorded their first annual fall in nearly a decade.

The EU residential property market rebounded in the second quarter, with house prices rising 0.3% despite rising interest rates, high inflation and weak economic growth.

However, house prices in the 27 countries have fallen over the past two quarters as soaring mortgage rates and rising living costs have deterred many Europeans from buying homes.

This resulted in EU house prices falling 1.1% year-on-year and Eurozone house prices falling 1.7%, the first annual decline since 2014.

The European Central Bank has raised its policy rate by an unprecedented 4.5 percentage points since last year, followed by banks raising mortgage rates and tightening lending standards to end nearly a decade of rising house prices in the region.

House prices in the EU have risen by an average of 50% since 2015 before falling last year as years of negative interest rates and European Central Bank bond buying drove mortgage rates to near zero in many countries.

Since then, falling house prices coupled with sharp rises in building materials and labor costs have chilled the construction industry in some countries, including Germany, which have been hit by project cancellations and developer bankruptcies.

Germany had the largest annual decline in house prices, reaching 9.9%, Denmark 7.6%, and Sweden 6.8%. The largest increases were in Croatia with 13.7%, Bulgaria with 10.7% and Lithuania with 9.4%.

Luis de Guindos, deputy president of the European Central Bank, said in a recent interview with the Financial Times that the nearly 10% drop in German house prices over the past year was “not entirely surprising.” “This is a clear indication that some of the overvaluation will be corrected.”

He said commercial real estate was the ECB’s “main source of concern in terms of financial stability.” But he added that “we also need to look at residential property” although it appears to be “more resilient”.