Europe remains in full-fledged house price boom, despite the economic repercussions of the COVID-19 pandemic.

Six of the ten strongest housing markets in Global Property Guide’s survey are in Europe. House prices have risen in no less than 21 of the 24 European housing markets for which figures were available during 2020.

Europe’s strongest housing markets

The Slovak Republic is now the strongest housing market in Europe, with house prices rising by a huge 14.28% during 2020, a sharp improvement from the previous year’s 3.34% growth its strongest y-o-y increase since 2007. On a quarterly basis, real house prices rose 3.27% during the latest quarter. Despite the pandemic, property demand, both from local and from foreign investors, remains fundamentally strong.

The Slovak Republic’s economy contracted by about 5.9% during 2020, in contrast to expansions of 2.4% in 2019, 3.9% in 2018 and 3% in 2017, as the COVID-19 pandemic delivered a heavy blow to economic activity. The European Commission expects the Slovak Republic to grow by 4% this year and by another 5.4% in 2022. The National Bank of Slovakia has a more optimistic forecast of a 5.7% expansion this year.

Turkey’s housing market continues to grow stronger, buoyed by strong demand from both local and foreign investors. The nationwide house price index surged by a record 13.7% during 2020, a sharp turnaround from the previous year’s 1.67% y-o-y fall. Yet on a quarterly basis, real house prices fell by 0.25% in Q4 2020.

For foreigners, Turkey’s currency devaluation means that the property market is very attractively priced, luring many buyers from the Gulf. In 2020, home sales surged 11.2% y-o-y to nearly 1.5 million, exceeding the previous record of 1.41 million units set in 2017, according to the Turkish Statistical Institute (TurkStat). Turkey’s economy grew by 1.8% y-o-y in 2020 – emerging as one of the few countries globally to avoid a contraction due to the pandemic. The economy is expected to grow strongly by 6% this year, according to the IMF.

Germany’s house price boom continues strong. The average price of apartments rose by 11.42% during 2020, at par with the previous year’s 11.15% growth. On a quarterly basis, house prices increased 2.29% in Q4 2020. Demand for residential property in Germany remains strong, buoyed by low interest rates, urbanization, and healthy household finances. In recent years, the migration crisis and strong economic growth have added to already strong demand. Despite the pandemic, residential construction activity continues to rise. In the first eleven months of 2020, dwelling permits rose by 4.8% y-o-y to 294,739 units, following 1% growth in 2019, according to Destatis.

Germany’s economy contracted by 5% in 2020, less than expected and a smaller decline than the 5.7% contraction recorded during the global financial crisis, as massive government stimulus measures helped lessen the impact of the COVID-19 pandemic. The European Commission expects the German economy to grow by 3.2% this year.

A surprising turnaround was also seen in the UK, with real house prices rising robustly by 5.56% during 2020, in contrast to the previous year’s 0.58% decline and the market’s strongest performance since 2013. Quarter-on-quarter, real house prices rose 2.26% during the latest quarter.

In London, real house prices rose by 5.3% (inflation-adjusted) during 2020, in contrast to a fall of 3.2% in 2019; however while house prices rose in outer London they fell in inner London. All other regions also saw house price rises during 2020. East Midlands saw the biggest growth, with house prices rising by 7.6% (inflation-adjusted) during 2020, followed by Outer South East (7.08%), North West (7.07%), Yorkshire and Humberside (6.71%), and West Midlands (6.47%).

Yet the UK economy is struggling, with real GDP contracting by 9.9% in 2020, the biggest annual decline on record according to the Office for National Statistics. The IMF recently downgraded its 2021 economic growth forecast for the UK to 4.5%, down from its initial projection of 5.9% growth.

Other strong European housing markets include Estonia, with house prices rising by 10.37% during 2020, Sweden (9.79%), Russia (9.14%), Vienna, Austria (8.06%), Netherlands (7.33%), Portugal (6.2%), Norway (5.75%), and Denmark (5.37%). All recorded positive quarterly growth during the latest quarter (Q4). All, except Portugal, had stronger performances in 2020 compared to the previous year.

There have been modest annual house price rises in Jersey (4.97%), Malta (4.82%), Iceland (4.05%), Finland (4.01%), Ukraine (3.65%), and Ireland (3.24%). All saw quarterly price growth during the latest quarter. All, except Jersey, performed better in 2020 compared to a year earlier.

European housing markets with minimal house price increases include Poland (1.78%), Switzerland (1.09%), and Romania 0.39%). Of these only Switzerland had stronger performances during 2020 as compared to a year earlier. Switzerland and Romania recorded a quarterly price increase during the latest quarter.

Europe’s weakest housing markets

House prices fell in only three of the 24 European housing markets for which figures were available during 2020: Montenegro, Latvia and North Macedonia.

Montenegro’s housing market condition is now rapidly deteriorating, amidst a declining economy. Prices of dwellings in new residential buildings plummeted by 10.45% during 2020, in contrast to the previous year’s 2.29% y-o-y rise.

Montenegro’s tourism-reliant economy suffered the worst contraction in the Western Balkans in 2020, with real GDP plunging by about 14.3%, in contrast to expansions of 3.6% in 2019 and 5.1% in 2018. The economy is projected to partially recover this year.

Latvia’s housing market continues to cool with average apartment prices in Riga falling by 0.97% during 2020, following a slight y-o-y rise of 0.49% in 2019. Quarter-on-quarter, house prices in the capital city increased 0.6% during the latest quarter. The European Commission expects Latvia’s economy to grow by 3.5% this year, following a contraction of 3.5% in 2020.

North Macedonia’s housing market is now losing steam, with the nationwide residential property price index falling slightly by 0.13% during 2020, in contrast to a y-o-y rise of 4.08% the previous year. On a quarterly basis, prices fell 0.2% during the latest quarter. The economy is projected to grow by 5.5% this year, after contracting by 5.4% last year, according to the IMF.

Image: Aerial view of Tallinn, Estonia, by Kavalenkava / Adobe Stock

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About Stefan Lambert

Stefan Lambert writes reviews of the European property market.

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