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House prices will rise in nearly all European markets this year on the back of historically low lending rates but in the UK prices will fall over the next 18 months due to the decision to leave the European Union, says a new analysis report. The German housing market is set to see the strongest growth due to high demand and tight supply of homes for sale but Italy is likely to see prices remain static due to a poor economic outlook, according to the report from S&P Global Ratings. ‘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. The report forecasts that eurozone real GDP will expand 1.7% this year, and it expects that 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. The UK is the only housing market for which house price declines are forecast as a result of the Brexit vote, although it points out that 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%. Although Ireland's economy has tight economic ties with the UK its housing market will continue its robust recovery, with prices growing by 6% this year, aided by the ongoing improvement in the labour market and a housing supply shortage. The forecast says that the Netherlands, also exposed to the UK economy, should also continue to see nominal prices rise by 5% this year on the back of economic improvements and favourable policy measures. Even the French housing market, which has been falling in recent years, is showing some resilience and looks set to grow by 2% in 2016 and in 2017 against a backdrop of low lending rates and modest economic growth. The strongest residential housing market gains this year will be in Germany, where robust economic fundamentals, a shortage of housing that is being further squeezed by the surge of migrants, and historically low lending rates should lead to prices inflating by 7% on last year. Spain and Belgium will each see house price rises of 4% this year. In Spain, economic growth, declining unemployment, and interest from foreign buyers should underpin a continued recovery of house prices the report says. In Belgium, forthcoming changes to fiscal rules and very favourable loan rates are still underpinning demand this year. While economic recovery and price incentives are also continuing to lift house prices in Portugal, a large stock of nonperforming domestic loans is… Continue reading →