House prices in Spain after the coronavirus are expected to fall between 3% and 3.5%

Prices will drop across European markets in 2020 according to S&P

Gtres

28 May 2020, 13:52

House prices will decline in nearly all major western European markets this year due to the economic effects of the COVID-19 pandemic, according to the "Government job support will stem European housing market price falls" report by S&P (Standard & Poor's) Global Ratings. The rating agency forecasts a drop of between 3% and 3.5% in Spain and expects prices to rise again in 2022.

In recent weeks, S&P has conducted an analysis of the residential market in Europe and the consequences of the COVID-19 crisis in the real estate market. The results show a hopeful future for sellers because the company predicts minimal falls in house prices.

"We expect house prices to fall between 3% and 3.5% in Ireland, Italy, Spain and the UK, 2.5% in Portugal and between 1.2% and 1.4% in Belgium, France and Germany," says Boris Glass, senior economist at S&P Global Ratings. "In Switzerland alone, we expect prices to continue to rise by at least 0.5% this year," Glass adds.

The ratings agency also expects the markets to recover faster than expected and that there will be some positive consequences. In fact, the rating agency expects house prices to return to growth by the end of 2022. Large-scale employment support plans implemented by governments across Europe will contain rising unemployment rates and, therefore, falling home prices, Glass explains.

Rapid action by the central bank has also limited the deterioration of credit conditions. In addition, monetary policy should continue to be extremely flexible and supportive, even as economies recover, the report says.

"Households are currently accumulating large savings, which should help to underpin the recovery of the economy and the housing market once virus containment measures are lifted and economies start to gradually return to a semblance of normality," says Glass.

This forecast could be revised in the coming months if there is another outbreak of the coronavirus in the autumn months or if the job market does not respond to the measures imposed by European governments to prevent layoffs, the report concludes.