By Halo Financial Team
The price is right…
Whether you’re looking for a holiday home, investment property, a place to live permanently when emigrating, or a retirement destination in Europe, the strength of the real estate market and currency exchange rates can play a vital part in your decision.
Halo Financial highlights five important countries in the European housing market – Spain, Portugal, UK, France and Italy – and provides recent Eurostat data about how property prices have fared.
The Eurostat House Price Index includes apartments, terraced and detached houses and covers new and resale property data from the 28 European Union member countries.
Spanish properties more expensive since 2017
Spanish property prices saw strong rises towards the end of 2017 – putting it in the top half among European nations. Average home values rose 6.7% in the year to Quarter 3, 2017, according to the latest data from Eurostat, the European statistics body.
Looking to 2018, European housing market experts believe prices in Spain should again perform strongly – assuming there are no major economic or political disruptions. However, that is a big ‘but’!
Over the last four quarters, annual price growth in Spain has accelerated, from 4.4% in the year to Quarter 4, 2016, 5.3% to Quarter 1, 2017 and 5.6% to Quarter 2, 2017. However, there are some major political issues that could affect the way the housing market performs in 2018, say sector experts.
The first is the possibility of a general election being called. In the last two and a half years, Spain has already had two general elections and Pedro Sánchez, the leader of the Spanish Socialist Party (PSOE), has recently suggested another could be on the way.
The ruling People’s Party needs backing from other parties to pass its upcoming budget. This includes the Basque PNV party, which has been critical of the government’s handling of the Catalan crisis.
If Prime Minister, Mariano Rajoy, fails, there are suggestions that a vote of no confidence in the government could follow.
The on-going Catalan crisis came about after Catalonia held an independence referendum last October that the Madrid government declared illegal. The central government subsequently sacked the Catalan regional government, imposed direct rule and called new elections. However, pro-independence parties were returned with a slim majority.
At time of writing, fugitive Catalan separatist leader and former regional president, Carles Puigdemont, is in exile in Belgium. If the crisis re-ignites, the housing market, particularly in and around Barcelona, could suffer, experts fear.
Portugal in third place
Spain’s neighbour, Portugal, did even better, coming in third for the Eurozone table, with home prices there enjoying a double-digit rise to 10.4%.
In the same way as Spain, Portugal has seen increasing property price growth and is expected to rise again throughout 2018. Prices have gone up from 7.6% in the year to Quarter 4, 2016, to 7.9% in Quarter 1, 2017 and 8% to Quarter 2, 2017, according to the Eurostat figures
. Looking ahead, credit ratings agency, Fitch, expects prices to rise around 5% in both 2018 and 2019, thanks to rising demand, particularly from foreign property buyers.
Portugal’s most pressing issue is economic rather than political – although the real estate market has benefitted from improvements brought about because of austerity measures by the socialist government.
Economic growth was revised up by 0.8% in 2017 and the budget deficit reduced, although the public debt-to-Gross Domestic Product (GDP) ratio is still too high at around 126%, when the European Union would like it to be around 60%.
Foreign demand for Portuguese property has been boosted by the success of the ‘Golden Visa’ property for residency scheme, which has generated real estate sales of more than €3.5 billon, according to the latest data from the SEF immigration body
France property sales hit all-time high
French real estate values have grown by a more modest 3.9% in the year to Quarter 3, 2017, according to the Eurostat figures, but that does not tell the whole picture about the health of the sector. France remains ever popular with property buyers from abroad; whether for holiday homes, rentals or a permanent move.
Looking at sales in the year to 2017 and the French property market
hit an all-time record of 958,000, figures from Notaires de France
state. “Whether it be older apartments or older houses, Greater Paris or the French provinces, selling prices and transaction volumes continue to rise.”
The sales total is 129,000 higher than in October 2016 and includes record annual rises in the departments of Bas-Rhin
(33%) and Charente-Maritime
After increasing since early 2015, sales volumes may have now peaked, say the notaires; however, 2018 is still set to see strong sales, they believe.
As for prices rises in 2018, they could be even better than 2017, with a predicted rise of between 3% and 5%, according to NAIM, the professional body for real estate agents in France.
UK property market overshadowed by Brexit
It’s easy to sum up the shadow over the UK property market in one word – Brexit
Since the referendum vote in June 2016, the twists and turns of the discussions between the UK and the European Union about the terms of leaving have caused uncertainty about the way ahead and have affected the economic outlook and to some extent the housing market.
Even so, values rose 5% in the year to Quarter 3, 2017, according to the Eurostat figures. That is more than double the 2.2% quoted by the Nationwide House Price Index
in February 2017.
Property values in London, the top target of international investors, and which have risen for a decade, are now falling. Reuters market experts believe house prices across the nation will rise just 2% in 2018, with London values dropping 0.5%.
However, for property buyers in the UK from overseas, the 6% decline in sterling since the referendum means they can get more for their money.
To find the latest about currency movements and expert commentary for sterling and other major international currencies, visit https://www.halofinancial.com/news/currency-insights.
Italian house prices still falling – bag a bargain?
The story is very different for Italy’s property market, which was the only European housing market to see an annual fall in values to Quarter 3, 2017, says Eurostat – although data from the Greek property sector was not available for consideration.
The fall was the worst performance in the last year. Values fell 0.3% in the year to Quarter 4, 2016, 0.1% to Quarter 1, 2017 and 0.3% to Quarter 2.
This is an ongoing problem – Italy’s house prices have now been falling for more than 10 years. Back in 2008, property investors accounted for one in five transactions. Now, it is much less.
Many Italians are unhappy with the country’s economy, unemployed at 11% the highest in the eurozone and the second worst debt burden after Greece.
Italy went to the polls again on 4th
March 2018, but no party achieved a majority, leading to a hung parliament. It will be interesting to see how the property market responds to this continued uncertainty, currently reflected elsewhere in Europe with the German election and ongoing Brexit debate and discussion.
Even so, with on-going price falls, property is very reasonably priced, say agents. Among picks for 2018 is the central province of Abruzzo,
which was named by Forbes among the ten best places in the world to live this year.
Full league tables from official European Commission Eurostat
For more European currency market and economic insights, read Halo Financial’s Monthly GBPEUR Currency Report.