2024 still a difficult year for the euro area housing sector

Housing market activity will remain relatively subdued in 2024. While credit standards are likely to be relaxed somewhat on the prospects of interest rate cuts by the ECB, borrowing costs will decline only moderately and in the later part of the year. In addition, GDP growth is set to be rather lackluster in 2024 and the labor market is expected to be less buoyant than last year. All this points to a rather modest performance in the housing market. On a more positive note, material building costs and inflation will ease further. i. In Germany, thanks to a better realignment with market’s fundamentals, housing prices will stagnate this year after falling by -8 . 4% in 2023, ii. France will see prices for dwellings contracting by 4 . 3% after -0 . 5% in 2023, as first-time buyers will continue to struggle with the affordability and strict underwriting rules, iii. H ouse prices in Spain will grow at a lower but still positive rate of +1 . 4% after +4 . 3% in 2023, as the impact of weaker GDP will be to some extent offset by ongoing supply constraints in Madrid and Catalonia, iv. F inally , the Italian housing market should post a slight positive growth of +0 . 7% in 2024 after +1 . 3% in 2023 mainly on the back of “affordable” housing prices (not the case for economic centers in the north)