- Latest housing market data positive, but impact of coronavirus not yet evident
- Prices this year +6%, next year -2%; transaction volume this year -5%, next year -10%
- Dampened housing market sentiment first sign of weaker outlook
- New reform proposals: majority will inhibit appreciation in property values over the long term
Full report:200709-Housing-Market-Monitor.pdf (80 KB)
Summary on forecast: The latest data continue to paint a positive picture of the housing market, with strong price rises and high transaction volumes. This applies to pre-owned properties and new-builds alike. It is questionable, however, whether these figures give a true picture of what is actually happening in the market. The figures for pre-owned properties, for example, lag behind by several months.
A first sign that a change is underway is provided by the Confidence Indicator of the Homeowners’ Association (VEH), which swung from mildly positive to slightly negative in May. A second sign is the rise in the number of properties for sale. More homeowners wanting to trade up are likely looking to sell their home first before buying another property.
The housing market is being supported by the low mortgage interest rates, which have been kept at that level mainly through the actions of the central banks. By intervening on an unprecedented scale they have helped to calm the financial markets. This ensures that mortgage lenders retain access to finance so that they can raise the funds to continue to provide credit.
The coronavirus crisis is nonetheless causing severe economic damage. Many businesses have been dealt a hard blow and the labour market is deteriorating. Unemployment is rising and the loss of jobs and incomes will have an adverse impact on the housing market. It seems inevitable that investors too will favour caution and step back from the market given the uncertain conditions.
With so much remaining unclear about how the coronavirus pandemic will develop, economic forecasts are subject to even more uncertainty than usual. Based on current assumptions, we expect the number of house purchases to decline by 5% this year and by 10% in 2021. House prices too will come under pressure, albeit it with some delay. While house prices are set to rise by a further 6% this year, we anticipate a 2% decline in 2021.