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Demand for residential real estate has increased in the pandemic Demand for residential real estate has increased in the pandemic Shutterstock

Real estate prices in the Eurozone are excessively high and a correction could be seen in the future

Written by  The Dubrovnik Times Nov 17, 2021

Demand for residential real estate has increased in the pandemic and the prices of residential and commercial real estate in the Eurozone are excessively high, which means a higher risk of their correction, the European Central Bank warned on Wednesday.

Families have saved more throughout the pandemic and more citizens were working from home, resulting in increased demand for housing and a rise in property prices in the second quarter of about seven percent, the strongest since 2005.

"The risks of price adjustments in the medium term have been significantly increased due to rising estimates in the excessively high value of residential real estate," the ECB said in a biennial report on the financial stability of the Eurozone.

The construction sector cannot keep up with demand, and the real estate market is particularly ‘hot’ in countries like Germany, France and the Netherlands.

"Housing is recovering, but labour shortages, stagnation in global supply chains and rising raw material prices are limiting the ability of the construction sector to expand housing supply, resulting in pressure on rising housing prices," the ECB said.

The more expensive commercial real estate market is now recovering, but the outlook is “particularly poor” for lower-quality commercial real estate, as teleworking, health and demand for environmentally friendly real estate are driving demand toward more expensive space, they added.

At the same time, the risk of a wave of corporate bankruptcies has decreased compared to last year, despite the abolition of certain state aid, the central monetary institution of the Eurozone points out.

"The number of companies failing to settle their debts has, on average, been lower than the most optimistic expected at the start of the pandemic, and the number of bankruptcies is still about 15 percent lower than it was before the pandemic," the ECB said.

 

 

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