FRANKFURT (Reuters) – House prices in the euro zone are in for a reality check as a pandemic-induced recession pushes more people out of work and hits household confidence, the European Central Bank said on Wednesday.
Residential property prices were remarkably resilient during the first wave of the coronavirus pandemic, rising by 5% in the first half of 2020, thanks to loan repayment moratoria and job- protection schemes put in place by governments.
But, with some of these measures expiring and economic indicators pointing downwards, the ECB said the outlook is now less rosy.
“Residential real estate price growth might face headwinds going forward as a result of a marked decline in GDP, consumer confidence and employment expectations,” the ECB said in its Financial Stability Report.
At a country level, valuations appeared most stretched in Luxembourg.