House Prices in Eurozone Decline, but Portugal Experiences the 5th Highest Increase

According to the latest data from Eurostat, the housing market in the Eurozone witnessed a decline in prices during the last quarter of 2023. However, Portugal stood out as an exception, experiencing the 5th highest increase in house prices among European Union (EU) countries.

The housing affordability situation in Europe worsened in 2023 due to rising interest rates on housing loans and the already high cost of housing in several countries, including Portugal. This combination resulted in a cooling demand for housing, leading to a correction in prices. Eurostat's latest data reveals that houses for sale in the Eurozone became 1.1% cheaper in the last quarter of 2023 compared to the previous quarter. However, the residential market is showing signs of recovery, as the decline in house prices was less severe than during the summer of 2023 (-2.2%). In contrast, Portugal continues to experience an upward trend in house prices, with the 5th highest increase among EU countries.

The report states, "In the fourth quarter of 2023, house prices, measured by the House Price Index, fell by 1.1% in the euro area and increased by 0.2% in the European Union (EU) compared with the same quarter of the previous year." During this period, rental prices in the EU increased by 3%.

While this was the third consecutive annual decline in house prices for sale in the Eurozone, there is a slight recovery evident, as the recent decline was less significant than the one observed during the summer of 2023 when housing costs dropped by 2.2% in the Eurozone and 1.1% in the EU. The improved market sentiment could be attributed to optimistic expectations regarding the anticipated interest rate cuts by the European Central Bank (ECB) scheduled for June, which are expected to reduce housing loan interest rates. Furthermore, the unexpected decrease in inflation in the Eurozone in March to 2.4% adds further support to this easing of monetary policy.

Analyzing the evolution of house prices for sale in the 26 EU member states with available data (excluding Greece), it is observed that eight countries experienced a year-on-year decline in house prices, with the largest declines recorded in Luxembourg (-14.4%), Germany (-7.1%), and Finland (-4.4%). The remaining 18 EU countries witnessed price increases between the last quarter of 2023 and the same period of the previous year. The highest increases were observed in Poland (13.0%), Bulgaria (10.1%), and Croatia (9.5%). Portugal also joined this group, with house prices becoming 7.8% more expensive during this period, marking the fifth-highest increase among EU countries.

Comparing the fourth quarter of 2023 with the third quarter of the same year, house prices declined by 0.7% in the Eurozone and 0.3% in the EU, while rental prices increased by 0.6% across the 27 member states during the same period.

Overall, the housing market in the Eurozone witnessed a decline in prices, but Portugal demonstrated resilience with a notable increase in house prices. The recovery in house prices in Portugal, coupled with anticipated interest rate cuts, suggests a positive outlook for the country's housing market.

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Editor: Luis Araújo