Europe’s housing markets’ recovery on track, but UK adversely affected by Brexit

The German housing market is forecast to show the strongest growth in 2016, with prices set to rise by 7% due to high demand and tight supply, but it is bad news for the UK's housing market which is hampered by Brexit, according to a fresh Standard and Poor’s (S&P) forecast.

Ireland is likely to see the second strongest growth rate in Europe, with prices rising 6% this year before gaining a further 2.5% in 2017 and 3% the following year.

S&P Global Ratings predicts that residential property prices will rise in almost all European markets this year on the back of historically low lending rates, despite the economic uncertainties created by the UK’s decision to leave the EU.

But S&P does expect Brexit to lead to lower home prices across the UK, with prices set to fall over the coming 18 months. In fact, the UK is the only housing market for which S&P estimate home price declines as a result of the Brexit vote. However, strong market gains in the first half of this year should keep full-year house price rises at 5%, with the market only likely declining in 2017, by 2%.

“While uncertainties caused by the UK's June 23 referendum decision to leave the EU could dent eurozone growth and, by extension, the housing market recovery over the next few years, we don't expect that it will derail it,” said Jean-Michel Six, chief economist for Europe, the Middle East, and Africa at S&P Global Ratings.

“We forecast eurozone real GDP will expand 1.7% this year, and we expect the European Central Bank's (ECB's) accommodative monetary stance, leading to historically low sovereign bond yields and mortgage interest rates, will spur improvements in Europe's housing markets,” he added.