Major European Cities Face Cooling Home Price Growth


Wednesday, June 12, 2019  /  08:07AM  /  Fitch Ratings / Header Image Credit: CNBC


Home price growth in Amsterdam, Berlin, Dublin and Madrid is expected to cool this year and next after several years of rapid growth across Europe, Fitch Ratings says in a new report. Price drops are expected in London and Stockholm while prices in Paris will be in line with 2018 growth. 

A common driver behind our expectations for the seven cities is reduced activity from first-time buyers, due to affordability and borrowing constraints. Other factors, such as restrictions on short-term lets in Amsterdam and Madrid, will reduce demand from investors. Meanwhile, Brexit will be a key driver of London and Dublin home prices. Brexit uncertainty is already weighing on prices in both cities, but Dublin could ultimately gain from financial services sector relocations. 

The imbalance between supply and demand will still support home prices in these cities, with the exception of London. In Stockholm, we forecast prices to stabilise in 2020 due to the city's shortage of non-luxury housing. Population growth will support demand for properties. In Paris, while the population is moving out of the central city limits, demand continues to be strong for the limited amount of housing in the centre. We expect Paris home price growth to remain at 5% this year and next, outperforming national growth.


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After the financial and eurozone crises, governments implemented measures to tackle oversupply and new supply has been slow to increase, particularly in Dublin and Madrid. Limited space for new builds, limited construction capacity and builders focusing on investors and the high-end segment of the market will continue to pose a challenge for the most of the cities covered in the report. As such, we expect supply to remain insufficient to meet growing demand, supporting home prices. 

However, oversupply of luxury properties is a feature of several cities and we expect prices of these properties to continue falling in London and Stockholm through 2020. 

We envisage private investors to continue contributing to the price growth. Rental yields in Amsterdam and Dublin have attracted investors to these cities. Local authorities in Amsterdam and Madrid have made efforts to curb short-term lets, but the buy-to-let sector continues to be active in these cities, as potential first-time buyers are outpriced. London is the only city covered in this report that has already seen reduced interest from investors, partly due to Brexit uncertainty and partly in response to the removal of tax benefits in 2017.

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