This publication introduces the latest short-term developments in mortgage and housing markets across the EU. The EMF Quarterly Review presents tables, charts and comments on the following indicators:
The Quarterly Review Data Hub shows data on mortgage and housing market developments on a more frequent, quarterly, and annual basis. This data set is based on a country sample covering around 95% of the total outstanding mortgage lending in the EU27 and the UK.
The total mortgage stock of the EMF country sample increased slightly to EUR 8.33 tn by the end of the fourth quarter. The quarterly increase remained at % y-o-y in Q4. Each quarter in 2023 the mortgage stock grew by under 2% y-o-y (1.5% Q1, 1.5% Q2, 1.4% Q3).
Europe’s mortgage and housing markets have continued to moderate the general downward trend. Lending volumes had been falling significantly since Q3 2022, but have been steadily recovering since the second quarter of this year, indicating the arrival of the trough in the slowdown of mortgage lending.
Europe’s mortgage and housing markets continued to cool down in the second quarter of 2023. The general downward trend, observed already since the third quarter of 2022, slowed down significantly in Q2 2023, and indicated the arrival of the trough in the slowdown of mortgage lending. While the quarterly decline of gross lending in Q4 2022 and Q1 2023 still amounted to 18.8% and 17.9% respectively, the decrease in Q2 2023 amounted to only 2.2%. Markets were still influenced by generally high inflation rates, which led to a further contraction in the construction sector, while demand for housing remained tight.
The overall stagnation of economic activity in Europe and the omnipresent increase in consumer prices continued. According to publications by Eurostat, seasonally adjusted GDP increased by 0.1% in the EU27 while GDP decreased by 0.1% in the Euro area compared to the previous quarter. Compared to the previous year, adjusted GDP increased by 1.0% in the EU27 and in the Euro area, after a 1.7% increase in the EU27 and a 1.8% increase in the previous quarter. As in the previous quarter, households’ final consumption continued to decrease by 0.3% in the EU and Euro area as well as government expenditure by 0.9% in the EU27 and by 1.6% in the Euro area.
In Q4 2022, the overall economic activity in Europe showed a relative deceleration. According to latest data published by Eurostat, seasonally adjusted GDP values show a relative deceleration: this indicator increased by 1.8% in Q4 2022 compared with Q4 2021 in the euro area (after an increase 2.4% in Q3 2022), while GDP expanded by 1.7% in the broader EU on the same basis, down from a yearly rate of 2.6% one quarter prior. For the whole year 2022, euro area GDP increased by 3.5% compared to 2021 values (5.3% in 2021), as did the EU27 aggregated GDP (5.4% in 2021). Inflation has been a persistent element in Europe and comparatively high, yet the expansion of consumer prices seems to have slowed during the fourth quarter. By the end of December 2022, the annual inflation rate in the euro area was 9.2%, after a 10.1% inflation rate one month prior. By comparison, euro area inflation in December 2021 was 5%. Regarding the greater EU27 area, end of year inflation was 10.4%, down from 11% in November 2022.
In Q3 2022, the European economy expanded once more, although the latest data from Eurostat suggests that the pace of GDP growth has decelerated slightly. According to the latest figures, (September 2022 data), EU27 seasonally adjusted GDP levels increased by 2.4% compared to Q3 2021, after a 4.3% yearly growth rate in the previous quarter. In the meantime, the euro area GDP expanded by 2.1% in Q3 2022 against Q3 2021 (+4.3% y-o-y in Q2 2022). As regards consumer prices, end September 2022’s HICP was 9.9%, after a rate of 8.9% in July 2022. Rapidly increasing energy prices contributed largely to this latest increase. Furthermore, by the end of the third quarter of 2022 and according to the European Commission’s economic sentiment indicator, EU business and consumer confidence was at 92.9 points, below the 100-point long term average, suggesting a more moderate economic outlook across various sectors.
In terms of overall economic activity, Europe saw additional gains in Q2 2022, although the macroeconomic scenario has become increasingly intricate. According to Eurostat (September 2022 data), EU27 GDP levels increased by 4.2% compared to Q2 2021, down from a 5.5% yearly growth rate in Q1 2022. Euro area GDP levels expanded by 4.1% in Q2 2022 against Q2 2021 (+5.4% y-o-y in Q1 2022). Household demand and investment volumes were largely behind this latest round of GDP growth. Consumer prices, in the meantime, continued to increase. The latest data (for September 2022) indicates that the euro area recorded a 10% inflation rate. The consistent expansion of prices during the first half of 2022 was driven by several factors, but most notably the rapid expansion of energy and food prices, as well as those of manufactured products. Uncertainties linked to the ongoing conflict in Ukraine and global supply-side bottlenecks can help explain this inflationary cycle.
In Q1 2022, the European economy expanded further. GDP levels in the euro area increased by a 5.4% on a yearly basis and by a rate of 5.6% in the EU 27 space. Against this backdrop, household and public expenditure increased, as did gross fixed capital formation volumes, signalling a relatively improved economic scenario in Europe. Inflation, however, has remained an economic challenge throughout, with euro area HICP annual rate closing at 7.5% in March 2022. It is worth noting that the effects of global supply-chain bottlenecks and the geopolitical uncertainties surrounding the conflict in the Ukraine have yet to be reflected in the European economy by the end of the first quarter of 2022. They nevertheless pose new challenges for both European businesses and consumers.
The European economy continued to grow in Q4 2021, as GDP levels in the euro area increased by a further 4.6% (compared to Q4 2020) and the broader EU 27 expanded by a yearly rate 4.8%. Despite the overall improvement of the economic situation, inflation took centre stage in late 2021. By end December 2021, euro area inflation stood at 5.0% (after a deflationary period in late 2020), while EU27 consumer prices registered a rate of 5.3%. Rapidly increasing energy prices are in great part driving the new price cycle, although other HICP components, namely services, food products and certain manufactured goods, also had an impact on the overall price levels.
In the first quarter of 2021, European residential lending continued to expand, building upon the upward trend that was commented on in the previous editions of this report. The economic situation in Europe, during said period, deteriorated further, as EU GDP levels, according to the latest Eurostat figures, decreased by 1.2% against Q1 2020 figures, following a 4.4% yearly contraction in Q4 2020. The quarterly change also shows a similar narrative, in that the European economy also decreased, albeit at a slower pace, against Q4 2020 production (by a rate of 0.1%).
From a general economic standpoint, the macroeconomic juncture in the European Union deteriorated slightly in the fourth quarter of 2020. The EU’s GDP contracted by -0.5%, according to Eurostat, against Q3 2020. This decrease in GDP takes place after the mid-year, partial restart, which saw EU production levels increase by a quarterly rate of 11.5% in Q3 2020. This latest downward shift is a result of the second wave of the pandemic and the subsequent implementation of new containment measures across Europe.
Macroeconomic figures in the third quarter of 2020 show some partial recovery from the significant downturn of the previous quarter due to the first wave of the COVID-19 pandemic. GDP rebounded by 11.5% and economic sentiment began to recover during the summer months, although not reaching pre-pandemic levels. Despite the relative improvement of the economy, the vast majority of measures put in place by governments earlier in the year were either maintained or extended during the period in order to mitigate the economic and social consequences of the pandemic.
During the second quarter of 2020 the world experienced the consequences of the first wave of the COVID-19 outbreak. In April, public life practically came to a standstill for the majority of the world’s population due to lockdowns to contain the spread of the pandemic. These lockdowns were gradually eased in Europe in May and June when the pandemic appeared to have slowed down.
The first quarter of the year has been characterised worldwide by the outbreak of COVID-19, which has imposed an unprecedented challenge for all nations around the globe. The COVID-19 pandemic initiated a world health crisis, obliging most European countries to take lockdown like measures and obliging populations to self-insolate with significant restrictions on movement. All of these measures together quickly impacted the economy which was essentially put into hibernation. In a matter of days the COVID-19 outbreak led not only to a world health crisis but also a new economic and social crisis. Forecasts indicate this will be the deepest economic recession in the history of the EU. This pandemic is furthermore symmetrical, affecting and damaging all countries and economic sectors.
The European economy continued to show resilience in the second half of 2019 thanks to its domestic drivers. GDP growth saw a virtual halt in Q4 2019 with an increase q-o-q of only 0.1%, the lowest since early 2013 in contrast with the relatively robust performance of the previous three quarters. Economic activity remains dampened by the high level of uncertainty linked to trade policy at global level. At domestic level, domestic demand, in particular private consumption, was the driving force of growth, whereas investment in the Euro area lost momentum, although its rate remained above GDP growth in the first three quarters.
In the third quarter of 2019 GDP rose by 1.4% in the EU 28 on a yearly basis (y-o-y) and by 1.2% quarter on quarter (q-o-q). Domestic demand remained resilient against international headwinds stemming from political and economic tensions. Aggregate unemployment remained stable at around 6.3% at EU level in Q3, similar to Q2, after nearly six years of continuous decrease.
During the second quarter of the year, the main macroeconomic indicators at European level continued growing on a yearly and quarterly basis. Therefore, despite the slow down that started already last year, European GDP experienced a positive evolution together with the reduction of unemployment levels.
In the first quarter of 2019, economic growth stabilised but it has remained weak and has continued with the loss of momentum that started the previous year. Nevertheless, the main macroeconomic indicators at an aggregate level still remained positive. The GDP for the Eurozone slightly grew on quarterly basis as well as on yearly basis and unemployment has further decreased following expectations.
The year 2018 was characterised by a moderately positive evolution of the main macroeconomic indicators. Despite the loss of momentum that was especially relevant during the first half of the year, the eurozone is growing. The real GDP of the Eurozone moderately rose by almost 2% and the forecasts of the European Commission indicate that this is going to be the trend in the upcoming years. In the same way, the unemployment rate experienced a slight decrease, being the average of the Euro area 8.4% in 2018, a figure that is expected to be even lower in 2019 and 2020.
For Q3 2018, the structure of the Quarterly Review has been slightly updated. Specifically, the Housing Market section has been subdivided into two categories, one on housing supply and the other on house prices. With this new approach, we hope to offer a broader overview of the housing and mortgage markets in Europe.
In this second quarter of the year, the economic momentum in the European Union continued with positive GDP growth, falling unemployment rates – which are now at pre-crisis levels or just slightly above them, and expanding private consumption
The first quarter of 2018 continues the trend of growth in the EU’s overall mortgage and housing markets, aided by mortgage interest rates remaining close to their all-time floors. Annual house price inflation remains positive across the EU with all countries reporting increasing prices, typically greater than 5% as consumer confidence remains strong, supported by positive economic fundamentals.
At the end of 2017, the economic momentum in the European Union (EU) continued with positive GDP growth, falling unemployment rates and expanding private consumption. In an environment of improving economic fundamentals, coupled with generally very low interest rates, the overall mortgage market in the EU is expanding, notwithstanding the overall challenging geopolitical international and domestic tensions. Almost across the board house prices are stable/increasing year-on-year (y-o-y) and, in some jurisdictions, they are increasing by double-digits, while in others there are clear signs of a shift towards a deceleration in house prices. In this generally positive market outlook, a growing number of countries are considering the introduction of or have already introduced macroprudential recom-mendations to cool-off the more heated market segments, either by introducing more stringent LTV caps or by imposing amortisation schemes for certain types of mortgage contracts. The widespread imbalance between demand and supply, especially in the high-growth areas of the continent, is likely to persist over the coming quarters, although construction figures are picking up. Of course, national heterogeneities are still present and these must be analysed in more depth.
In Q2 2017 the economic momentum in the European Union continued with positive GDP growth, falling unemployment rates and expanding private consumption. In an environment of improving economic fundamentals, coupled with generally very low interest rates, the overall mortgage market in the EU is expanding. Almost across the board house prices are stable/increasing yearon-year (y-o-y) and, in some jurisdictions, they are increasing by double-digits. In this generally positive market outlook a growing number of countries are considering the introduction of or have already introduced macroprudential recommendations to cool-off the more heated market segments. The widespread imbalance between demand and supply, especially in the high-growth areas of the continent, is likely to persist over the coming quarters, although construction figures are picking up. Of course, national heterogeneities are still present and these have to be analysed more in depth.
The first quarter of 2017 continued on the same path seen in 2016, namely increasing mortgage markets coupled with a general increase in house prices over the year and with persistent low, though in some jurisdictions and for some products, timidly increasing interest rates. These dynamics are underpinned by a widespread improvement of the economic performance of the EU whose GDP in Q1 2017 increased by 2.4% with respect to Q1 2016, coupled with an ongoing diminishing unemployment rate and a general increase in consumer confidence.
After the British decision to leave the EU, the election of Mr Trump as the 45th President of the United States was a further element of an unpredictable 2016. Nevertheless, the housing and mortgage market in the (for the time being) EU28 shows a remarkable resilience, fostered by an ongoing expansive monetary policy, together with a macro-economic upswing and a general widespread improvement of the economic conditions. In 2016, for the first time since 2007, all EU Member States depicted a positive GDP growth. Moreover, notwithstanding the growth of the construction industry in several countries, the well-known excessive demand for housing, especially in the most thriving regions of the European continent, pushed up house prices.
In light of mounting political uncertainty both within and outside Europe, the third quarter of 2016 has provided an aggregate housing and mortgage market picture which is in line with the previous quarters. In the EU house prices continued their upwards trend, on an aggregate level, while the outstanding mortgage lending figure in our sample, after having reached the peak at the end of 2015, slightly contracted by 1.9% since then. Interest rates continued their downward path as well and the unweighted average rate of our sample dropped by 19 bps year-on-year (y-o-y) and lies for the first time below 2.5%. In this latest quarterly review a number of updates and new charts have been added.
The second quarter of 2016 ended with the decision of the UK to sever its ties with the rest of the EU, thus opening a period of potentially high political and economic uncertainty throughout the continent, which will manifest its effects on mortgage and housing markets in the months and years to come. For the time being, house prices in the EU continue their upwards trend, on an aggregate level.
The first quarter of 2016 showed that in the EU outstanding mortgage lending increased while interest rates continued to decrease, although at a decelerating pace with respect to the previous quarters. Considering house prices, the overall trend was increasing, though heterogeneous among the different countries.
The last quarter of 2015 depicts a similar aggregate situation those of the previous quarters: overall recovery of gross lending figures due to improving economic environment; generally increasing or stable house prices; and historically low interest rates as a reflection of the expansionary monetary policies of the European Central Bank (ECB) et al.
The figures of this quarter still depict a picture of aggregate, though decelerating, expansion on a yearly basis of the mortgage market, with low interest rates and generally increasing house prices. However, some signs of change can be seen in the mortgage interest rate level, which in some countries on the continent started to invert its decreasing tendency, even before the Federal Reserve’s December 2015 decision to increase the reference rates for the first time in nearly 10 years. Housing prices have not inverted their generally upwards trend in line with the well-known supply/demand imbalances, the stickiness of the housing supply and the massive demographic changes due to the migratory influx.
The promising trend in EU mortgage and housing markets seen since 2014 also continued in spring 2015 with an increase in gross lending in nearly all countries. More favourable economic fundamentals, decreasing interest rates and a shortage of housing supply, especially in the most dynamic urban areas in Europe, pushed house prices upwards. However, there are large heterogeneities both across and within countries. Notwithstanding the dynamism of this last period, the amount of overall gross lending in the EU is still around 62% of the pre-crisis level peak in 2006. Besides the increasing demand for mortgages, the persistent low interest rate environment also started to shift the preference for mort- gage contracts from a variable to a xed rate in a number of countries.
The strong performance observed during Q3 2014 and Q4 2014 in EU mortgage and housing markets consolidated during Q1 2015. Gross lending grew strongly in most countries and house price developments mirrored rising demand and improving sentiment. The interest rate environment continued to ease, further supporting growth.Nonetheless,mortgage volumes remain far from pre-crisis levels and fragmentation continues to be relatively high both between and within different EU countries, though interest rates on mortgages appear to be converging, even on a nominal level.
The strong performance observed in Q2 and Q3 2014 in EU mortgage and housing markets was consolidated during Q4 2014. Gross lending grew strongly in most countries and house price developments mirrored rising demand and improving sentiment. The interest rate environment continued to contract, further fuelling mortgage markets. Nonetheless, the situation remains far from pre-crisis levels and fragmentation continues to be relatively high both between and within different EU countries, though interest rates on mortgages appear to be converging, even on a nominal level.
The performance of the EU mortgage and housing markets was significantly stronger during Q2 and Q3 2014 than in previous quarters. Gross lending grew in most countries, and house price developments mirrored rising demand and improving sentiment. The interest rate environment continued to contract, further fuelling the mortgage markets. Nonetheless, the situation remains far from pre-crisis levels, and fragmentation continues to be relatively high both between and within different EU countries.
The latest developments in mortgage markets in the EU largely reflect broader economic trends. Countries showing the first signs of economic recovery are also experiencing an improvement in their mortgage market indicators. As with the general economic situation and outlook, the developments in EU mortgage and housing markets are reflecting a highly fragmented picture, with different countries displaying different paces of recovery, both between each other and within themselves.
An easing in the intensity of the crisis is pointing to a possible recovery of many European economies, with potentially positive consequences for EU mortgage and housing markets. Nonetheless, economic fundamentals are still weak and jurisdictions are experiencing different paces of recovery, which is reflected in differing performance across the EU.
In Q3 2013, the proxy used for the EU27 markets1 indicates that gross residential lending increased by +7.0% q-o-q and +9.3% y-o-y to reach 49.2% of its 2007 average. This strong q-o-q performance was mainly due to the positive contribution of the UK (+6.4%) and France (+2.9%), owing to significant seasonal effects for both countries.
In Q2 2013, mainly resulting from the macroeconomic rebound in the euro area and further decreases in mortgage interest rates, gross residential lending in the EU27 increased by +2.0% year-on-year (y-o-y) and +2.9% quarter-on-quarter (q-o-q) in seasonally adjusted terms (i.e. the best performance since Q4 2010). Buoyant developments were observed in the Czech Republic, France, Germany, Hungary, Ireland and the UK.
In Q1 2013, outstanding residential lending contracted q-o-q for the second consecutive quarter in the EU27 and registered its lowest y-o-y increase since Q2 2011. Nevertheless, there were still significant differences across national markets: outstanding residential lending (in domestic currency) continued to increase robustly y-o-y in Belgium, France, Poland, Romania and Sweden, while noticeable deleveraging processes were observed in Hungary, Ireland, Portugal and Spain.
In Q4 2012, the total amount of outstanding mortgage lending increased y-o-y, but contracted q-o-q for the first time since Q2 2011, partly reflecting the noticeable household deleveraging in Ireland, Portugal and Spain. As regards gross lending, in Q4 2012, the total amount decreased significantly in seasonally adjusted terms, despite substantial reductions in mortgage interest rates. For the whole year 2012, gross lending contracted in most markets, resulting from economic recession, poor economic prospects and low consumer confidence.
In Q3 2012, the total amount of outstanding mortgage lending was almost stable y-o-y in the euro area, while it slightly decreased in the UK and recorded a robust growth in Sweden and Romania. However, the aggregated figure in the euro area masked diverse growth dynamics in mortgage lending at country level: poor macroeconomic performance and worsening consumer and investor confidence led to a significant y-o-y contraction in Ireland, Italy, Portugal and Spain, while outstanding mortgage lending continued to grow in Belgium, France and Germany.
In Q2 2012, outstanding mortgage lending contracted again y-o-y in Hungary, Ireland, Portugal and Spain, partly caused by noticeable real GDP recession. Outstanding mortgage lending continued to grow slowly y-o-y in Denmark, Germany, the Netherlands and the UK, while it kept a steady pace in Belgium, France, Poland, Romania and Sweden. As regards gross lending, the total amount granted in Q2 2012 decreased y-o-y in most markets, in line with previous quarters. Once put into historical context, the amount of gross lending remained on an upward trend since Q1 2008 in Belgium, Denmark, France, and Sweden, while it was on a clearly downward path in the same period, in Hungary, Ireland, Portugal, Spain and the UK.
The unfavourable macroeconomic environment continued to negatively affect new mortgage lending in Q1 2012, with a year-on-year decrease in new lending for at least three consecutive quarters in Belgium, France, Ireland, Italy, Portugal, Spain and Sweden. Housing markets’ conditions remained divergent across the EU. Whilst year-on-year house prices continued to increase in Belgium, France and Germany, decreasing house prices were still recorded in Denmark, Hungary, Ireland, Poland, Portugal, Romania, Spain and Sweden. In the UK, the prices posted their first increase since Q1 2011. In Q1 2012, the numbers of building permits and housing completions fell to historical lows in several countries. Mortgage interest rates in the EU recorded small movements in Q1 2012, as a result of moderate monetary policy easing.
Established in 1967, the European Mortgage Federation (EMF) is the voice of the European mortgage industry on the retail side of the business, representing the interests of mortgage lenders at European level.
