2023-08-10 14:17:16
Housing loses attractiveness as an investment for consumers in the euro area from the second quarter of 2022, due to expectations of an increase in inflation and mortgage interest rates. The perception of households of housing as a good investment “fell from the maximum registered in the second quarter of 2021 to a minimum in the first quarter of 2023”, consider the economists of the European Central Bank (ECB) in a box of the bulletin economic, published this Thursday.
Perception fell significantly in 2022 but has leveled off since late 2022, the decline was driven by expectations of higher mortgage interest rates, which were exacerbated by expectations of rising inflation in the near term in early 2022 , with lower economic growth and falling house price growth at the end of 2022.
“Since the beginning of the year, this perception has recovered somewhat, but it continues at low levels,” add the ECB economists. “The expectations of higher mortgage rates led households to consider that housing was a much less attractive investment,” adds the ECB in the economic bulletin.
The ECB has raised its interest rates since July last year by 425 basis points, to 4.25%, to curb inflation. The tightening of monetary policy and financial conditions in general have had an impact on the perception of households.
Two factors are weighing on housing demand: the negative real income effects of higher inflation and the free cash flow effects of higher debt service costs.
“Expectations for interest rates on mortgages and 12-month savings accounts have risen by almost 2 percentage points and 1.5 percentage points, respectively, since the beginning of 2022,” according to figures in another box of the ECB bulletin.
The percentage of respondents who expect greater difficulty in obtaining credit (of any type) increased steadily from the beginning of 2022 until October of the same year and has fluctuated around 30% since then
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