Real estate market: prices are rising despite crises – stability in sight?

Real estate market: prices are rising despite crises – stability in sight?

The real estate market in the euro area is facing a new price increase as demand remains stable despite tight supply. A recent study published by the ECB suggests that residential property prices will not only remain high, but could even rise. The reasons for this include the high construction costs and the lack of affordable housing, which, according to the Study by vol.at burden the market. Despite the ECB's recent interest rate cuts, which have been in effect since mid-2024, the property acquisition issue remains, further limiting affordability.

In recent years, the real estate sector initially faced a dramatic decline, but trends now point to a recovery. According to the Market research from JLL shows an increase in total transaction volume to USD 471 billion in the first three quarters of 2024, an increase of almost six percent compared to the previous year. There are particularly positive developments in the office rental market, especially in the USA. Experts note increasing optimism among market participants, who hope for sustainable stability, even if uncertainties remain due to geopolitical conflicts and new political landscapes.

The impact on the real estate sector could be far-reaching, particularly in terms of pricing and demand for home loans. In 2024, demand for new home loans in Austria has experienced a notable increase, fueled by the ECB's interest rate cuts. While the second half of 2024 recorded ancillary lending of 6.2 billion euros, this shows the interest of buyers despite an increase in construction and purchase costs. Investors' confidence in the stability of the market will be crucial in influencing future price developments and guiding possible investment decisions.