Here’s a convenient continuation of the rising-European-rates-meets-real-estate theme.
Standard & Poor’s reckon “fresh headwinds are gaining force in Europe’s real estate markets” due to rising interest rates (or at least, expectations of them) in a report out on Wednesday.
Some headwinds in chart form:
That would be mortgage payments for those with variable interest rates — the highest proportion of which lie in Spain and Italy according to S&P — increasing over the next 18 months. Meanwhile, the rating agency figures, the supply of new housing loans will continue to fall in most markets as banks have to refinance at higher costs. S&P says rates on housing loans in the eurozone and the UK had already started to rise before the spring, “in line with long-term yields on international capital markets.”
And if you want a country-by-country breakdown of S&P’s housing expectations, here it is:
Overall we anticipate that the U.K. housing market will drift sideways in the coming 18 months, with prices shedding about 5% this year and roughly flat in 2012. The risk of a deeper double dip would become more significant if the economy as a whole experienced a more severe downturn than we currently forecast.
[In France] Early signs of a slowdown have started to surface since the beginning of 2011. Sales volumes in the first quarter were down 3% from the same period a year earlier. On average, prices were roughly flat, slipping just 0.3% in the first three months of the year. We see a couple of reasons that suggest a slowdown will take shape in the next 12 months.
We anticipate a prolonged slump in Spain’s housing markets. Prices may not post massive drops in the coming 12 to 18 months as sales pick up slowly. But we think more time will elapse before supply and demand balance out again.
House prices in Ireland were down 33% from their peak at the end of 2010 (see chart 9), the largest price contraction in Western Europe since the beginning of the current crisis. Irish house prices have, in our opinion, completed their correction but it will take time–probably another couple of years–before we see tangible signs of market activity resuming.
Double-dips? Slowdowns? Prolonged slumps?! Say it ain’t so, central banks!
Related links:
Taylor-fied of eurozone interest rate policy – FT Alphaville
How big the BoE’s interest rate bind? – FT Alphaville
This is not normal ECB tightening – FT Alphaville