While the Paris real estate market has entered a downward cycle with more than a year of acceleration since the Covid crisis, are other European capitals on the same trend? Which are showing the biggest price drops? What about the purchasing power of real estate buyers? Elements of the answer with Meilleurs Agents, a studio that specializes in online real estate valuations.
Towards the end of rising interest rates in Europe?
Credit rates remain on the rise in all European countries surveyed by Meilleurs Agents, but appear to be stabilising. Between April and July 2023, the increase in rates was therefore modest and did not exceed +0.2 percentage points in most countries.
Apart from France, which is an exception, it saw the largest rate increase, +1.3 points in one year, including 0.5 points between April and July 2023.
“Rates should maintain their upward trajectory in France in the coming months to approach the levels seen in its European neighbours,” Meilleurs Agents said. However, France remains the country with the lowest rates (around 3.5% on average in July for all loan durations combined) compared to the other countries monitored (more than 4% in Italy and Portugal).
Brussels, Rome, Berlin: the highest purchasing power of real estate
The rise in interest rates had a significant impact in Europe as it reduced the credit capacity of households and caused a loss of real estate purchasing power.
A couple without children receiving the median national income can apply for a home of 62 m² in Brussels (- 7 m² in October compared to January), 42 m² in Rome (- 5 m²) and 35 m² in Berlin (- 2 m²) .
Brussels and Rome stand out for their relatively affordable real estate prices: per m² in the Belgian capital sells for an average of €3,322, almost three times cheaper than in Paris. Rome has the lowest price per m² of the major cities studied, at an average of €2,998.
Paris: purchasing power 17 m² in average…
In Paris, where the price per m² remains among the highest in European capitals (€9,857), although it is falling, the purchasing power of real estate is among the lowest among countries in Europe. A French couple who wants to become an owner in the capital can therefore request only 17 m² (- 3 m²) on average.
Lisbon: the lowest real estate purchasing power
Lisbon has the most limited purchasing power: a Portuguese couple will only have access to 13 m² (2 m² lost in 10 months) with an average price of €5,366 per m².
“In Portugal, real estate prices have seen a significant increase of almost 80% between 2017 and 2022, far outpacing the evolution of average salaries over the same period (+24.8%),” notes Barbara Castillo Rico, head of economic studies at Meilleurs Agents. This follows the Portuguese government’s efforts to stimulate economic recovery after the economic crisis of 2007-2008, which led to an inflow of foreign capital that upset the balance of the housing market. »
Rise or fall in prices in European capitals
The biggest price increases are observed in the capitals of Southern Europe: Lisbon shows +7.3% and Madrid +3.2% in one year. The Spanish capital has an attractive price per m² (€4,037) and remains on an upward trend, recording +0.3% over the past three months, according to Meilleurs Agents.
Paris is the capital city most affected by the drop in prices of almost -5% in one year. A trend exacerbated by tightening conditions for access to credit and rising interest rates. It persists, with prices down -1% over the past three months.
Berlin also shows property prices down 3% year-on-year. “This is explained by the drop in demand, where more and more buyers find themselves excluded from the market, while the production of loans decreases, which ultimately leads to a drop in prices,” points out Meilleurs Agents. Indeed, the total amount of credit granted to German households to buy houses has fallen significantly, halving in just one year, according to the European Central Bank (ECB). »