The probability of a fall in real estate prices in Europe is growing, under the effect of the slowing economy and the rapid rise in interest rates, said in a note published Wednesday the rating agency Moody’s. “The risk of a downturn in the real estate market in Europe and a large revaluation of residential land has increasedwrites Moody’s. Before continuing:As mortgages become more expensive, housing demand will fall, likely leading to an easing in house prices following several years of growth».
But this fall in prices will not allow more households to access property, their purchasing power being reduced by theinflation. «Housing demand will also suffer from weak consumer confidence, with consumer risk aversion growing as the Russia-Ukraine conflict continues to fuel economic uncertainty.predicts Moody’s.
Banks in trouble
A sharp fall in prices, greater than 15%, would be likely to put banks that have recently acquired financial securities backed by mortgage loans in difficulty, particularly in France, Italy, Spain and the Netherlands. Banks in northern Europe are the most exposed to a market downturn, notes Moody’s, but they are also those with the most comfortable financial cushions. A fall in prices would also have consequences for social housing in the United Kingdom, which is financed by groups which derive most of their income from property sales on the market.
Already in France, real estate experts predict falling prices, particularly in the capital. In Paris, Best Agents are considering a decrease of only 3% in prices, over one year.
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