EU house prices have risen at the fastest pace in nearly 14 years in the first three months of this year, driven by low interest rates and high savings for households despite the historic economic damage caused by the pandemic. of coronavirus.
House prices across the block grew at an annual rate of 6.1 percent in the first quarter, up 5.8 percent in the previous three months and the fastest pace since the third quarter of the year. 2007, according to data released by Eurostat on Thursday.
Growth in house prices for the euro area, to 5.8 percent, has been the fastest since the end of 2006.
House prices have risen sharply in recent months in the most advanced economies, including the United Kingdom and the United States, as unprecedented stimulus measures introduced by major central banks to combat economic impacts of the pandemic have pushed a wave of liquidity into financial markets and have driven mortgage rates to record lows.
Ricardo Amaro, an economist at Oxford Economics, said the “solid momentum” in EU house prices was likely to continue for the rest of 2021, “supported by the vast availability of excessive savings in segments of the economy. markets that are active in home buying, an environment of supportive interest rates and a strong rebound in broader economic conditions from [the second quarter] forward. “
The average mortgage rate on the eurozone fell below 1.6 percent in the first five months of the year, the record low and fell from a peak of 5.7 percent in 2008, according to separate data from the European Central Bank. This means not only that more people can afford to take out a mortgage, but also that the purchase is cheaper in terms of rent, contributing to an increase in the number of buyers.
Many household finances remained relatively healthy during the pandemic despite economic disruption, thanks to government support measures aimed at keeping people in work and a drop in consumer spending during the closures that have increased. savings rates.
The growth of home jobs has also fueled the demand for homes and triggered a wave of home movements as people search for more living space.
Jessica Hinds, an economist at Capital Economics, said the price increase reflected the ECB’s “very expansive monetary policy, government support for jobs that have largely protected employment and incomes, and ‘imposition of moratorium on mortgage payments’.
However, he added that the trend did not look like a real estate bubble. “Valuations don’t seem to be massively lengthy and residential investment doesn’t seem to be booming,” he said.
Germany reported the fastest rise in prices among the major EU economies to 9.4 percent; countries including Denmark, the Czech Republic and the Netherlands have recorded double-digit annual price growth.
In contrast, growth in property prices in Spain slowed to 0.9 percent, falling from a decade-high 7 percent in the third quarter of 2018.
The data were released just hours before the ECB published the results of its first strategic review for nearly two decades, which is expected to discuss the economic consequences of housing costs among a number of other issues.