Housing prices are falling. Therefore, you probably believe that it is easier to buy housing. This is unfortunately not the case. Faced with the limited decline in property prices, mortgage interest rates are rising, banks are tightening their conditions and inflation is eating away at disposable income. The European real estate market is blocked and one wonders why the governments do not take firmer measures.

House prices have reached record highs over the past decade. The decline we are currently seeing is limited. Due to very low mortgage interest rates, housing demand has long been at an all-time high. The offer was not enough. Now that the offer is better, affordability is an issue.

Even if employment holds up well, the banks see the economy shrinking and believe it more likely that people will find it increasingly difficult to pay their monthly housing charges. In all major European economies, we see that banks are more reluctant to grant new mortgages. They prefer to build up their buffers to deal with problems with existing loans.
Due to the reluctance of banks and rising interest rates, it remains difficult for low incomes and young beginners to find affordable housing. Also because the supply of cheaper houses or social rental housing is limited. The problem of affordable housing is less acute in southern Europe, but there too, it is difficult for low-income earners to obtain a loan.
Looking at social housing in EU countries, little progress has been made over the past ten years. In Belgium, for example, less than half of the municipalities meet the social housing standard. In net terms, the number of social housing units has hardly increased, while the waiting list has almost doubled. Nevertheless, the Flemish government talks about speeding up and increasing capacity, but in practice, this is only done bit by bit. This also applies to other countries like the Netherlands, Germany and the United Kingdom.
According to our research department, public expenditure on (social) housing has remained broadly stable in relation to GDP (0.4%) over the past 15 years. The largest economies have even reduced their relative spending on housing: Germany has fallen from 0.5% of GDP in 2009 to 0.4% in 2021, France from 1.0% to 0.9% over the same period and Spain from 0.1% to 0.0%. Italy remained stable at 0.0% in both years.
The housing measures taken by governments stand in stark contrast to the firm support plans that were put in place on short notice during the coronavirus crisis and then for the energy crisis. According to our researchers, the social housing crisis is so urgent that drastic measures are also needed to achieve a smooth functioning of the social housing structure and the rental market. The arrival of affordable social rental housing in particular would be a major step forward.
We expect no compensation from private investors. First the coronavirus, then the war in Ukraine; these are difficult years for property developers. High material costs and disrupted supply chains make construction projects difficult to budget for. Now that the European economy is collapsing, real estate players will not be rushing to launch new construction projects. This does not improve the prospects of adequate housing for low incomes.

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