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December 4, 2022

European Real Estate prices have gone up despite the increases in interest rates

Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

 High inflation that is reducing the purchasing power and high financing costs due to high interest rates are making buying real estate increasingly difficult for people. The monthly installments are on the rise and seem to deter investors from buying property. But the Real Estate market looks to be still far from imploding.

House prices in Romania increased on average with 8.5% in the second quarter of 2022 compared with the similar period of 2021. This increase is lower than the average figure for the European Union that is close to 10%. It is lower than the annual inflation rate that was around 15%. Since May this year, the prices on square meters in Romania stopped the increase and lost 2.6%.

Romania houses’ price increase is sitting in the range of 27.4% increase in Estonia and the 2% increase in Cyprus. In our region Czechia is showing the largest yearly increase with 23.1% followed by Hungary 22.8%, Slovakia 16.6%, Bulgaria 14.6% and Poland 12.4%. In the Western Europe, in the last 12 months, German house prices increased a bit over 10%, France 7.1% and  Italy 5.2%.

78% of the Romanian investors that answered to the latest eToro Retail Investor Beat are not particularly confident in the Romanian economy. The percentage of investors that do not show confidence in the local property market is lower, 64%, but higher than the 50.2% from three months ago.

While all these price increases are making the situation in the housing market look positive, latest Eurostat Q2 2022 data is showing that in the last 12 months, in 9 European countries of the 14 covered, the number of sale transactions decreased. The number of housing transactions increased in 5 countries: Cyprus (+34.0 %), Bulgaria (+26.8 %), Spain (+13.4 %), Portugal (+8.7 %), and Ireland (+0.5 %). From our area, in the report we have Hungary that is showing a 2% decrease, while having one of the highest price increases in Europe and Bulgaria showing increases in the number of sales and prices. Austria has a 15% decrease in the number of sales year on year with a 12% increase in prices.

In Germany, according to a study, real estate sales are likely to fall this year for the first time since the global financial and economic crisis of 2009. After a record year in 2021, the conditions on the market have turned, according to a new analysis by the Gewos Institute. Accordingly, sales of apartments, houses, commercial real estate and land should fall by seven percent this year. Though year on year we are seeing a 10% increase in price, starting with July this year the prices start to decrease. However, for the next year, Gewos is seeing a slowdown to about 3% of the price increase and not a drop. The pressure on the German housing market remains high due to strong immigration and because new construction is halting due to high construction and credit costs.

In Romania, according to the latest report, in August the volume of constructions for residential buildings decreased more than 1% compared with the same month of last year. But from the beginning of the year it increased by 6%. The loans for acquiring houses increased continuously quarterly from Q3 2021 but the NBR data for August is showing a slight decrease but still 9.2% up from the same period of last year. The data is painting a complicated picture for the Real Estate market for the next period.


Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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