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The pivot in ECB monetary policy is triggering the reversal in the housing cycle.

The pivot in ECB monetary policy is worsening the housing affordability. prices are now in an adjustment phase.

Despite the strong growth of the beginning of the year, we observe credit production and residential activity starting to slow down gradually because of the rise in financing costs. House prices rose by 9.9% in Europe and rents increased by +5.2% across the European markets we monitor. Investment volumes remain resilient. €45.5bn have been invested in the first 9 months of 2022 i.e. +15% regarding the 5-year average but -8% compared to last year. We expect residential markets across Europe to slowdown owing to the sharp increase in financing costs, the drop in affordability and the risk of overvaluation in some markets.

In 2021, investment in the residential sector hit an all-time high of almost €100bn (+60% vs the previous year and +47% vs its 5-year average). The residential sector represented 29% of total real estate investment vs 19% in 2019.