In 2021, the housing market in the Netherlands is expected to cool.
Despite the fact that the Dutch housing market is expected to have a good year in 2020, the pandemic has created a lot of uncertainty.
Further interest rate cuts, increased investor activity, and increased trust in the housing sector explain why prices are expected to rise 7.8% in 2020 (2019: +6.9%). Current home sales rose to 236,000 units (2019: 219,000). Despite the tightening of the housing market, the housing shortage (the gap between the size of the housing stock and the number of potential households) decreased by around 30,000 homes in 2020, from a total of 330,000 homes. doha sale
This is primarily due to a decrease in the number of foreign workers entering the country. As a result, household growth slowed to about 44,000 (a -40 percent decrease from 2019), while housing stock increased by 75,000. In 2021, if the housing shortage continues to decline, housing demand will fall. This is one of the key reasons why we expect the housing market to cool in 2021, with an average price growth of 5.0 percent and home sales down 10% from 2020. However, the level of uncertainty in the local area is higher than normal. The effect of the crisis on the housing market in 2021 will be largely determined by the speed of economic growth, level of trust, and interest rate direction.
Belgium: Yields are under strain.
Some dark clouds were forming over the Belgian real estate market at the start of 2020: The economy was not looking good at the time; the National Bank of Belgium reported that Belgian houses were overvalued, a significant tax break in Flanders was eliminated, and new mortgage restrictions were imposed. Then came the Covid-19 pandemic, which wreaked havoc across the globe. Despite the fact that the Belgian economy contracted sharply, residential real estate prices remained stable.
In reality, from 4% in 2019, price growth has accelerated to around 5%. This can be explained by government income assistance, low mortgage rates, active buyers, and a higher willingness to pay. House price growth is expected to slow to 3% in 2021 and 2% in 2022, according to our forecasts. As government support programs are phased out, we expect the unemployment rate to rise. We also believe that as achieving an attractive yield becomes more difficult, investors may become less interested. Indeed, higher house prices combined with slower income growth placed downward pressure on yields, making it more difficult to ask for higher rents.
House prices in Portugal are expected to fall in the coming quarters.
Since 2016, house prices have risen at a rapid rate. Indeed, house prices increased by 39% between 2016 and 2019 (according to Eurostat's house price index), owing to a strong economy and international interest in Portuguese real estate. House price growth slowed in the third quarter of 2020, dropping from 10% YoY in the first quarter to about 7%. The Covid-19 crisis has made it more difficult for foreigners to purchase real estate in Portugal.
Due to the upcoming tough economic times, we expect house prices to cool more in the coming quarters, but we do not expect a significant price correction. First, the market will continue to be characterized by low supply and high demand. Second, the loan repayment suspension has been extended from March 2021 to September 2021, limiting downward pressures. Third, Portuguese real estate remains affordable as compared to other European countries.
In rural areas of Austria, real estate prices are expected to increase.
Demand for detached houses, as well as houses with a garden or terrace, continued to rise in Austria's residential real estate market. House prices are expected to rise by around 11.6 percent year over year in 2020.
Looking ahead, we expect real estate prices to rise, especially in rural areas, as demand for detached houses and dwellings with gardens has increased in the previous year.
However, affordability is expected to decline as strong income increases are unlikely for the time being, and funding conditions may deteriorate as a result of tighter lending requirements. The terms and conditions for loans to households for home purchases continued to tighten in the fourth quarter of 2020, according to the OeNB's Financial Stability Report.
Expect a decrease in house price inflation in Greece.
The Greek housing market entered 2020 with previous ANFIA property reductions and tax incentives for non-EU home buyers still in effect. In addition, Greece was struck by Covid later than the rest of the eurozone, so 1Q20 was unaffected by the economic shock. The government's safety net for employees, which included short-term jobs and a voluntary redundancy ban, also aided household disposable income. All of this should have resulted in house prices that at a decent 4% YoY rate in 2020.
The housing inflation profile, on the other hand, has declined, and this trend may continue in 1H21 as pandemic uncertainty persists with the new variants. The effectiveness of vaccination, as elsewhere, will be crucial in deciding the economic exit pace, but it may not work its magic until 4Q21. We predict that Greece will avoid seeing house prices contract again in 2021, but that average annual house price inflation will still fall to about 1.2 percent.
Prices are rising in Ireland due to a supply shortage.
Despite the pandemic, the Irish housing sector performed well in 2020. Price inflation, which had been on the decline since 2018, picked up to 0.6 percent YoY in the fourth quarter of 2020. Household incomes rose in the first three quarters of the year, thanks to government funding, providing substantial support to the housing sector. Price increases are expected to continue in the coming year, as supply shortages remain a major trend in the Irish housing sector.
Finland's housing market remains optimistic.
The price of single-family homes in Finland has increased at a faster pace than the rest of the country. The rate of growth accelerated to a solid 5.4 percent in the fourth quarter of 2020, the highest since 2011. This is due to increased household disposable income, increased savings, and low interest rates. Expectations of a swift economic rebound to pre-pandemic levels support the outlook. However, downside risks such as rising unemployment as a result of the government's withdrawal of funding and higher interest rates dampen the outlook.