GEAB 112

Here and there[1] we may read some optimistic analyses on the European property market, saying either that the “revival” is here, that the sector is in good health, and so on. As our readers might guess, we are less enthusiastic and suggest the utmost caution in this regard, although the outlook is not uniformly and entirely gloomy.

The real estate market remains hard to analyse because of the actions of the various economic and political players. The perspectives are very uncertain this year, so the utmost caution is required. Many shocks are expected (elections in Europe, economic and geopolitical turmoil, etc.), but, as we have seen with the unexpected rise in the financial markets following the election of Trump or further with the Brexit affair, the reactions of the system have become essentially unpredictable now.

So far, the interest rates, which have been kept down by the central banks, largely explained the good shape of Western real estate. Despite the first movements initiated by the Fed, our team does not anticipate a strong rise in rates by the ECB or the Fed, notably because Trump’s policy needs a weak dollar, and because the timid return of inflation in Europe is mainly due to oil prices and does not cause hyperinflation. Therefore, property borrowing rates are likely to remain very low in the coming year (despite a slight recovery), which will continue to support the housing market. One can see that the costly policies in support of real estate have all been maintained despite the state of the finances of the various countries, indicating that it is a sensitive political subject which will not be dropped soon: the system avoids at all costs the fall of real estate prices…