Rising inflation will cause European house prices to rise at a slower rate this year, ratings agency S&P predicts, while Brexit uncertainty will have a significant impact on the UK’s housing market.
The ratings agency predicted in a report that house prices would continue to rise in most European markets this year, citing ongoing favourable lending conditions and the continuing economic recovery.
It forecast that the strongest house price gains this year would be in Ireland, with a 7 per cent rise, Germany, with a 6 per cent rise and the Netherlands, with a 5 per cent rise.
But Ireland was the only country in the report predicted to show a faster rate of house price growth in 2017, with S&P’s 7 per cent growth forecast up from a 6.3 per cent estimate in 2016. It estimated that German house prices, in contrast, rose 9.6 per cent last year while prices in the Netherlands went up 6 per cent.
S&P also warned that house price growth in the UK would slow to just 2 per cent this year after gains of 7.5 per cent in 2016 amid uncertainty over Brexit that it predicted would lead to a slowing in investment, as well as a squeeze on household spending power amid higher inflation.
Italy was another weak spot, with no house price growth predicted amid uncertainties over the economic and political outlook in the eurozone’s third largest economy. The report also predicted zero house price growth in Switzerland this year, citing already high residential property prices and regulatory measures.
“We.. expect house prices will rise more slowly than last year in most markets as inflation edges up, potentially putting interest and mortgage lending rates on a gradually upward trajectory,” said S&P Global Ratings economist Sophie Tahiri.
The report also warned that the UK’s split from the EU and the threat of increased protectionism in the US could hit European growth, with a knock-on effect on housing markets.
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