House prices in Europe set to rise with growing demand, limited supply: ECB

By Bahattin Gonultas and Mucahithan Avcioglu

BERLIN / ISTANBUL (AA) - The European Central Bank (ECB) expects house prices to continue to rise following the recent recovery in the eurozone real estate market, according to an ECB report released on Monday.

High construction costs and high house purchase prices are currently an obstacle to creating additional supply in the housing market, and the upward trend in prices may continue as demand remains fundamentally robust while housing supply remains limited, it said.

The report said that real estate prices in the eurozone remain high despite a recent decline.

"This has negatively affected the affordability of housing despite a meanwhile less tight monetary policy," it said.

According to ECB research, property prices in the eurozone have fallen by 3% in the last 18 months, less than the 5% decline seen during the 2008 global financial crisis and the euro debt crisis.

Meanwhile, the region's property market experienced a multi-year boom before 2022, during which central banks repeatedly warned of overvaluation in major cities.

Skyrocketing inflation after the COVID-19 pandemic, sharply rising energy costs, rising interest rates, and tighter financing conditions had caused house prices in the eurozone to fall from 2022 onwards.

By the third quarter of 2024, real estate prices in the region had risen back above their 2022 highs.