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Property Index Overview of European Residential Markets 9th edition, July 2020 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Introduction

Introduction 3 We are pleased to present you the ninth edition of the Property Index, Overview of European Residential Highlights 5 Markets. During almost a decade, Property Index has become one of the most important and popular European Impacts of the Coronavirus Pandemic real estate publications and has acted as a valuable source for on Residential Markets in Selected Countries 6 professionals, institutions and general public.

Economic Development in 7 Property index analyses factors shaping the residential markets and their development and compares residential property Comparison of Residential Markets – prices across selected European countries and . Housing Development Intensity 10 The publication aims to provide you with European residential Comparison of Residential Property Prices market data on a regular basis and to answer questions on how in Selected Countries and Cities 15 Europeans live and at what costs.

Mortgage Markets in Europe 30 Despite the fact that the publication’s focus is to provide a complex overview of the past year’s development on 32 Annex: Comments on Residential Markets residential markets in European countries, we could not ignore the current unprecedented situation caused by the coronavirus 45 Contacts pandemic. We included a brief overview of early impacts of the pandemic and related measures on residential markets in the Authors 46 participating countries and their expected future development.

We hope you will find this edition of Property index interesting and that it will provide you with insights and information you need.

2 3 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

This year, we analyzed residential markets This edition of Property Index has the in: historically highest number of participating countries with Bosnia and Herzegovina, • (AT); Highlights , , Israel, , • (BE); Serbia and joining the publication.

• Bosnia and Herzegovina (BA); Most presented indicators are on a year- • Bulgaria (BG); on-year basis and are to some extent also influenced by geopolitical situation and • (HR); 7,145 EUR/sqm various factors affecting the volume of • (CZ); supply and demand. Luxembourg took the position of the • (DK); most expensive country in terms of new Prices of new dwellings A proven international and cross-functional in Norwegian capital • (FR); apartment prices in 2019 -7.4% team of Deloitte professionals in the Oslo decreased by 9.0% • (DE); development, mortgage and real estate year-on-year markets prepared the Property Index. This Average transaction • (HU); publication has been prepared using data price of new dwellings in Serbia decreased • Ireland (IE); collected by individual Deloitte offices in the participating countries. by 7.4% between 2018 • Israel (IL); and 2019, which is the biggest fall among • (IT); Property Index capitalizes on Deloitte’s 11.4 extensive knowledge of the real estate compared countries • (LV); and development industry, enabling us to For the fourth time in • Luxembourg (LU); provide you with independent and credible a row, homebuyers information. in the Czech Republic • (NL); had pay the highest • (NO); multiple of their annual gross salary to purchase 12,863 EUR/sqm • (PL); a 70 sqm dwelling remained on the position of the most expensive to • (PT); purchase a square meter of apartment in Europe before Tel Aviv • Serbia (RS); and

• Slovakia (SK);

• (ES); and • (UK). 164%

Housing prices in and were on average 164% higher than the national average, 550 EUR/sqm which is the highest deviation among participating countries With 550 EUR/sqm of a new dwelling, Bulgaria had the lowest prices among countries in the Property Index

30.71 EUR/sqm

Luxembourg City, a new entrant into the publication, was the most expensive city in terms of monthly rent

4 5 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

construction works might be the shortage Transaction activity in Q2 2020 is expected Curious circumstances can be observed of labor, especially in countries, where to be significantly lower than in the previous on the real estate market in Bosnia and most of the construction workers are years on most of the selected markets. Herzegovina. Its future development Impacts of the from abroad and returned home after the A decline will be caused by uncertainty is closely intertwined with economic outbreak of the coronavirus. in terms of economic and epidemiologic development of , as big development that might encourage share of buyers are from the numerous Rental markets in most of the participating potential buyers to postpone their decisions BiH diaspora living and working abroad. Coronavirus Pandemic countries demonstrated the fastest into safer times. Moreover, most of the A similar phenomenon, although to response to new circumstances on the banks across the participating countries a smaller extent, is to be seen also on other market. Especially in major cities, such have already applied stricter conditions, eastern European real estate markets. as Paris, , or , such as lower LTV ratio or higher disposable restrictive measures effectively stopped income of applicants, on new mortgage The current unexpected situation brought on Residential Real Estate the inflow of tourists and many of loan applications. On the other hand, several restrictions into the functioning of apartments located in city centers, interest rates of almost every central bank in the residential real estate market. In the originally used for P2P accommodation Europe are close to zero, which means that immediate future, numerous technological services, were introduced to the long-term mortgage interest rates will remain low for solutions could emerge and change the Markets rental market, which created a pressure on the upcoming period. This might encourage unwieldy processes on the market. In many rents to decrease. However, it is uncertain, people with stable income to invest into countries, virtual property inspections whether these dwellings will return to the residential real estate. via video calls were enabled to tackle the How did residential markets in selected countries react to short-term market once tourism activity social distancing measures. The pandemic recovers. In terms of price development, most might change the way people think about the outbreak of the virus and what is expected to happen countries expect property prices to housing. Spread of the option to work in the near future? The development of the residential real stagnate or undergo a slight correction remotely will possibly redirect part of the estate market across Europe varies in 2020 before returning to growth in demand from cities into more peripheral from country to country. In ten out of 2021 or 2022. Most positive outlooks are regions and adjust price levels across 23 participating countries, stagnation is in countries with limited available land countries to be more even. Furthermore, After several years of growth across all and developers are in a better financial although a slight delay in permitting expected on the residential market in terms bank, which are also attractive for foreign implementation of technologies such as segments of the real estate market, year condition than on the edge of the previous processes and construction may occur, of price and a decline in terms of transaction professionals, such as Luxembourg, electronic validation of contract certificates 2020 was anticipated to confirm this trend. crisis. there must not be a significant outage of activity. Experts from six countries have Belgium or the Netherlands. Contrary, via block chain may become part of the Nevertheless, since late December 2019 production in order to protect the housing negative expectations in terms of price a steep decline is expected in the sales process together with virtual reality a new type of coronavirus started to spread We asked our real estate experts from market. The role of government help, either development and overall market activity United Kingdom after the market fully tours in development projects currently in across the world from . In February participating countries to share their in form of guarantees or direct financial in the future. These countries being ones, understands the economic impacts of construction. and March 2020, most of the European thoughts and observations about the involvement, will be crucial to tackle this which were hit hard by the virus (the United the pandemic and the still uncertain countries were hit by the pandemic and immediate impacts the coronavirus had imminence. Kingdom, Croatia) or ones with already form of Brexit. Hungary also expects This crisis gives the whole market a new were forced to impose restrictive measures on the residential markets and how will slowing markets (Hungary). Contrary, an accelerated decline on the already perspective on how people across Europe on their economies and the free movement markets develop in the upcoming months. Immediately after the implementation of a positive outlook is being articulated by cooling residential market. Other live and has a potential to change it. of citizens. Together with the rest of the protecting measures in the participating representatives from countries, which countries that will be negatively affected economy, residential real estate market has During the past crisis, we witnessed a huge countries, residential markets in most have strong fundaments for further by the protective measures and cautious also been affected. shrink in construction activity, when many of them effectively froze. The majority development of the residential market. behavior of people will be traditional developers had financial problems and of pending transactions, which were in These countries being Belgium, where summer holiday destinations as Croatia, The economic crisis that will follow the most of the projects were put on hold. early phases of the process, were put on prices were growing constantly for the last Spain or Italy, whose economies are pandemic is expected by many experts to This resulted in low numbers of hold. Almost no new deals were initiated, 37 years, the Netherlands, Norway, Israel, highly dependent on tourism. Especially be the worst since the Great Depression. initiated and completed dwellings in years as personal property inspections were Slovakia and the Czech Republic. In any case, prices of second homes in these However, from the perspective of real after the crisis, which in combination with almost impossible to perform. Some these predictions were made with currently countries might decrease significantly, as estate market, this crisis is different from low financing costs and economic upturn countries reported a year-on-year decline available information on the epidemiologic demand will be weak. the previous one in years 2008 – 2010. kick-started the residential price growth in transactions by up to 80%. The effect and economic situation and might change in Negligence of banks in terms of property across Europe and deepened the shortage on construction activity varied between case of unexpected events. financing and consequent trading of of dwellings in several countries. Our countries based on the tightness of derivatives based on these loans caused experts agree that in case of a long-lasting protective measures. For example in the financial crisis. The current economic economic downturn, a similar pattern may France, works on 90% of construction downturn have been caused by disruptions appear on some markets. Nevertheless, sites were interrupted, while in the Czech from the government’s side to prevent development companies are in a better Republic, workers only needed to adapt to the spread of Covid-19 disease. Banks position to handle complications and additional hygienic rules. Another threat to

6 7 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

The only positive thing about the recession Fiscal policies of EU countries reacted to As government debts of several European is that inflation is not a concern. Weak recession in two ways – automatically and countries were not on a sustainable demand and low oil prices will keep discretionary. Automatic reaction means path even before outbreak of COVID-19 inflation close to zero (maybe even in that government budgets run deficits pandemic a renewal of sovereign debt crisis negative territory). HICP inflation reached whenever economies fall into a recession cannot be ruled out. European wide 750 bn. only 0.1% in May. and they stabilize economies by doing so. EUR fiscal stimulus is in preparation. Apart from that, governments support ECB reacted swiftly to the crisis. It cut the economies by discretionary measures. Apart from COVID-19 caused recession, Economic deposit rate by 10 bps to -0.5%. Moreover Mainly employment subsidies (“Kurzarbeit”), faces other problems – it renewed asset purchases programs and postponement or remission of tax trade tensions, and Brexit. Great Britain left and also affirmed that it would prevent payments are used. Credit guarantee the EU on 31st January. Transitional period unjustified increases in costs of debt schemes are also utilized. Aim of the above will expire on 31st December 2020. In the financing of Eurozone countries through mentioned measures is to strengthen cash meantime, a trade agreement must be bond purchases. flow of firms and households that was negotiated. Therefore no-deal Brexit is still Development significantly hurt by lockdown of economies. a real possibility. in Europe Growth of Real GDP in EU 28 (%) 4% 3,2% 2.7% 2.3% 1.8% 2.0% 2.0% 2% 1.5% The economy of Eurozone has been activity in the Eurozone restricts export growing for 6 years since 2012–2013 demand for manufacturing production. The resulting 0.3% Eurozone Sovereign Debt Crisis. However, As a result, we forecast the Czech GDP economic recession 0% this economic boom has been terminated to drop by 10.0% this year, i.e. even more -0.4% by COVID-19 pandemic that has spread than Italy and Spain. Preliminary data from China to the entire World. Europe about GDP in Q1 2020 confirm that decline will be even deeper -2% was one of the worst hit region, especially of Czech economy will be deep as Czech countries Italy and Spain. To combat the economy contracted by 3.3% in qoq terms than 2008–2010 -4% pandemic severe lockdown (restriction versus contraction of EU economy by 3.5% of movement) of economies had to be and of Eurozone by 3.8%. We forecast the Financial Crisis. imposed. The resulting economic recession recovery to be fast but the pre-crisis -6% will be even deeper than 2008–2010 will be reached probably as late as in 2022 -6.3% Financial Crisis. Services are hit to greater provided no further lockdown is necessary. extent by lockdown than manufacturing -8% which is evident from developments of The trend of improving labour market 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 purchasing managers' indices. situation is over. The labour market situation will worsen again because of The economy of Eurozone is forecasted to a deep recession. The unemployment rate Source: , Deloitte forecast decline by 6.3%. The downturn will be the in EU will jump to roughly 10% this year deepest in countries that were severely hit from a record low of 6.3% last year. Relief by the pandemic – Italy where decline by can be expected next year provided a next The housing market is usually sensitive coming months and years. On the other 9.1% is expected and Spain with expected wave of the pandemic does not arrive. to economic conditions, especially GDP hand, the accommodative monetary policy decline by 8.0%. The German economy, growth and interest rates. Correlation of the ECB and other central banks in the the biggest trading partner of the Czech Closure of borders and localization of between lagged GDP growth and house EU will keep interest rates at low levels that economy, is forecasted to decline by supply chains paralysed international prices in the EU reached 83% during the will be supportive for the housing market. 7.0%. The Czech economy was affected in trade much more than trade disputes did last 10 years. Thus, the economic downturn two ways – domestic lockdown restricts in recent years. A deep decline of foreign is likely to reduce house prices in the services (mainly hospitality and catering, trade turnover can be expected. and tourism) and decline in economic

8 9 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Completed dwellings Bulgaria, whose population has decreased 1,000 citizens. Latvia and Bulgaria followed The indicator of housing development by over a million since year 2000. with 3,300 and 4,500 completed dwellings intensity on the residential market shows respectively. the number of completed dwellings per Contrary, the highest number of dwellings 1,000 citizens in a given country. Due to per 1,000 citizens, over 11, had been The lowest development intensity could differences in population of the participating completed in Luxembourg, followed by be observed in Balkan countries, where countries, recalculating the indicator to France with 6.7 dwellings per 1,000 citizens. the population is decreasing due to the per 1,000 citizens allows to compare the migration of workforce into western development activity between them. In terms of absolute values, France defended European countries. its position of European leader in dwelling Five countries, Bulgaria, Bosnia and completions with almost 450,000 dwellings Among central European countries, Herzegovina, Portugal, Spain and Latvia delivered to the market in 2019. Germany Poland retained its position as a regional had less than two completed apartments and Poland followed with 293,000 and leader both in terms of completions per per 1,000 citizens in 2019. However, 207,500 completed apartments respectively. 1,000 citizens (5.4) and total number of Portugal, Bulgaria and Spain are among four completed dwellings (207,500). countries with the highest housing stock Only 2,900 dwellings were completed per 1,000 citizens, so these countries might in Bosnia and Herzegovina in 2019, not need to expand it. Especially in case of which translates into 0.9 dwellings per

Housing Development Intensity Index of number of completed dwellings per 1,000 citizens

14

7.3

12 11.65 Comparison 10 449.4 8

30.4 6.70 207.5 50.6 of Residential 59.5 5.66 6 21.2 5.41 5.54 70.7 5.18 293.0 20.2 36.4 4.35 16.8 4.06 178.8 3.53 3.70 Markets – Housing 4 3.41 21.1 2.89 3.3 2.65 14.4 71.6 2.16 2.9 1.73 2 4.5 Development 1.40 1.52 0.88 0.64 Intensity 0 BG BA PT ES LV HU UK DK CZ DE SK NL IE BE PL IL NO FR LU

Number of completed dwellings per 1,000 citizens Total number of completed dwellings (ths.)

Source:10 Deloitte national offices

10 11

8

6

4

2

0

700

600

500

400

300

200

100

0

14

12

10

8

6

4

2

0

200%

160%

120%

80%

40%

0%

5%

4%

3%

2%

1%

0% 14

12

10

8

6

4

2

Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

0

14 10

Initiated dwellings the smallest country participating in the On the other hand, twelve countries Housing Stock Another three countries, Slovakia, Poland and followed by France (35.67 mil.) and Italy Similarly, as in terms of completed dwellings publication, as countries with less than reported an increase in residential The overall size of the housing stock, along Luxembourg, had less than 400 dwellings (35.09 mil.).Spain (25.78 mil. dwellings), the per12 1,000 citizens, Luxembourg recorded 10,000 initiated dwellings. construction activity. Initiated dwellings with its quality, can be generally seen as per 1,000 citizens. However, Poland and United Kingdom (24.35 mil.) and Poland 8 also the highest number of initiated grew by 31% year-on-year in Croatia from an indicator of quality of life and level of Luxembourg were also among countries (14.82 mil.) were also countries with more dwellings per 1,000 citizens, 8.9, which made As in terms of completed dwellings, the 11,500 to 15,200. Intensive acceleration economic development of a country. with high development intensity, hence their than 10 mil. dwellings. up for 5,600 started dwellings. Poland and highest absolute number of initiated could be also seen in Portugal (+18%), housing stock is expected to grow. 10 France followed with 6.2 and 6.1 initiated dwellings was in France (410,300), Poland Ireland (+17%) and the Czech Republic The highest stock per 1,000 citizens could Contrary, the smallest stock was reported 6 dwellings per 1,000 citizens respectively. (237,300) and Germany (219,500). These (+17%). be found in Portugal and Italy with slightly Portugal, Bulgaria and Spain were countries in Luxembourg with 244,000 apartments. three were the only countries with over over 581 dwellings. That is almost twice as with relatively large housing stock per 1,000 Less than three million dwellings could be The8 lowest new construction intensity was 200,000 initiated dwellings. Germany As in terms of completed dwellings, Poland big as housing stock in Israel, where there citizens and the development intensity also found in Slovakia (2.06 mil.), Ireland recorded in Bulgaria, with only 0.1 initiated had lost the second position from 2018 had shown the highest development were only 293 dwellings per 1,000 citizens. in terms of both initiated and completed (2.06 mil.), Norway (2.58 mil.), Denmark 4 dwellings per 1,000 citizens in 2019, which because of a 37% fall in the number of intensity among central European Israel reported by almost 70 apartments dwellings (2.68) and Israel (2.68 mil.). translates into less than 1,000 started initiated dwellings. countries, leading by over two dwellings less than in the United Kingdom, which had 6 apartments across the country. Bosnia per 1,000 citizens before Slovakia. As the the second lowest number of dwellings per The largest housing stock could be and Herzegovina and Latvia had 1.2 and Double-digit decreases in new largest country in the region, having more 1,000 citizens with 361 apartments. found in Germany, 42.54 mil. dwellings, 2 1.3 initiated dwellings per 1,000 citizens development intensity had also been than twice as many initiated dwellings as in4 2019 and 4,000 and 2,500 started recorded in the Netherlands (-18%), United Hungary, Slovakia and the Czech Republic dwellings in total respectively. Kingdom (-10%) and Belgium (-10%). combined. Initiations also decreased in Hungary, 0 Bulgaria, Bosnia and Herzegovina and Denmark, Slovakia and France. 2 Latvia are accompanied by Luxembourg, Housing Stock Number of dwellings per 1,000 citizens 0 700

35.09 5.97 Housing Development Intensity 3.96 Index of number of initiated dwellings per 1,000 citizens 4.82 25.78 600 35.67 581.3 581.5 42.54 566.2 5.6 10 541.5 548.3 5.51 2.58 531.9 4.46 2.68 4.98 511.8 8.92 7.81 500 2.06 480.6 480.9 455.9 460.7 465.2 0.24 449.0 2.06 14.82 8 422.6 24.35 410.3 237.3 31.8 390.6 400 378.0 386.2 50.8 26.2 360.6 6.12 6.18 2.68 56.1 5.92 6 5.56 5.37 293.2 21.5 4.89 300 15.2 35.1 38.7 57.2 3.94 137.4 17.1 3.73 4 219.5 3.59 3.62 151.0 24.0 3.28 200 2.92 2.93 2.64 2.34 4.0 2.5 2.24 2 1.31 100 1.0 1.20

0.14 0 0

BG BA LV UK PT DE ES DK NL HU CZ HR SK BE IE IL NO FR PL LU IL UK SK PL LU IE NL HU DK CZ BE NO DE FR AT ES BG IT PT

Number of initiated dwellings per 1,000 citizens Total number of initiated dwellings (ths.) Number of dwellings per 1,000 citizens Total number of dwellings (mln.)

700 Source: Deloitte national offices Source:14 Deloitte national offices

12 13

600 12

500 10

400 8

300 6

200 4

100 2

0 0

14

12 200%

10 160%

8 120%

6

80%

4

40%

2

0%

0

5%

200%

4%

160%

3%

120%

2%

80%

1%

40%

0%

0%

5%

4%

3%

2%

1%

0% Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Comparison of Residential Property Prices in Selected Countries and Cities

The ninth edition of Property Index covers Depreciation or appreciation of national and Hungarian forint by 2.5% and 1.8% data from 23 European countries and 67 currencies other than are shown in respectively. There were virtually no changes cities. In order to harmonise the outcomes, the chart below. The largest year-on-year in the average annual exchange rates in all price statistics are calculated in . difference have been seen in Israel, where relations between Euro and , However, besides market movements, the Israeli new shekel appreciated by over Czech koruna and Bosnia and Herzegovina annual prices changes were also 4% against Euro. On the other side, Euro convertible mark. influenced by changes in exchange rates. appreciated against Norwegian krone

Euro Exchange Rates Changes, annual changes (+%) = Euro appreciation, (-%) = Euro depreciation

EUR/NOK 2.47%

EUR/HUF 1.83%

EUR/PLN 0.76%

EUR/DKK 0.17%

EUR/HRK 0.05%

EUR/CZK 0.02%

EUR/BAM 0.00%

EUR/RSD -0.32%

EUR/GBP -0.92%

EUR/ILS -4.29%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

Source: Yahoo Finance 14 15 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Norway # 4,120 EUR/ sq m 1.9%

Average Transaction Price of a New Dwelling Latvia in Selected Countries (EUR/sqm), 2019 1,646 EUR/ sq m -5.4% Despite continuous convergence On the other hand, two other newly Denmark of European economies and close included countries, Bulgaria and Bosnia and United Kingdom 3,124 EUR/ sq m interconnections between them, Herzegovina, were countries with the lowest 3,861 EUR/ sq m 3,0% the residential markets developing prices of new dwellings. Bulgaria recorded 2.3% independently in each country. Among 550 EUR/sqm and Bosnia and Herzegovina 23 participating countries, four recorded 849 EUR/sqm of newly built apartment. a price decrease and 19 showed growth in Netherlands** prices of new dwellings. Slovakia, Ireland, Croatia, Latvia, Poland, 2,632 EUR/sq m Hungary, Serbia and Portugal are countries, 4.4% Germany* Luxembourg, taking part in the survey for whose prices were in a range from Ireland Poland 3,727 EUR/ sq m the first time, assumed the position of the 1,000 EUR/sqm to 2,000 EUR/sqm. Most 1600 EUR/sq m 1,520 EUR/ sq m 9.5% most expensive country to buy a square of these countries are from central and -1,2% Czech Republic 9.7% meter of a new apartment in 2019 with eastern Europe, which might indicate that 2,602 EUR/ sq m 7,145 EUR, more than 2,500 EUR ahead Europe can be divided into two parts based Belgium* 8.6% of France with 4,523 EUR/sqm. Austria on dwelling prices. From this region, only 2,583 EUR/ sq m Luxembourg 4.1% 7,145 EUR / sq m and Norway recorded average prices prices in the Czech Republic were out of the Slovakia* over 4,000 EUR, with 4,176 EUR/sqm and above mentioned range with 2,602 EUR/sqm, 12.9% Austria 1,770 EUR/ sq m 4,120 EUR/sqm. However, data for Norway especially due to high share of Prague on 4,176 EUR/ sq m 11.0% are only available for detached houses, as the national average. 3.9% no other transactional data were available. France Five countries, Luxembourg, France, 4,523 EUR/ sq m Hungary Another three countries, Israel, the United Spain, Hungary and Slovakia had growths 12.6% Croatia 1,475 EUR/ sq m Kingdom and Germany, were in the range exceeding 10% in 2019. 1,664 EUR/ sq m 11.5% between 3,700 – 3,900 EUR/sqm. 7.6%

Italy Serbia

2,314 EUR/ sq m 1,249 EUR/ sq m 0.1% Average Transaction Price of the New Dwelling (EUR/sq m), 2019 -7.4% Annual Change (%) Bulgaria

Bosnia and 550 EUR/ sq m < 1,000 2,501–3,000 Herzegovina 1.9% 849 EUR/ sq m 1,001–1,500 3,001–3,500 3.7% 1,501–2,000 3,501–4,000 Spain 2,398 EUR/ sq m Portugal 2,001–2,500 > 4,001 12.4% 1,162 EUR/ sq m 6.3% * bid price ** older dwellings # detached house Israel Source: Deloitte national offices 3,882 EUR/ sq m 4.3%

16 17 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Average Transaction Price of a New Dwelling (EUR/sqm) and annual change

Vienna 3.4% 4,868 Lisbon 8.4% 3,908 PT AT 2.1% 3,539 Porto 20.1% 2,219 0.2% 3,992 2.4% 1,648 0.0% 3,350 RS 8.4% 1,081 BE* 3.8% 3,375 Niš 5.3% 790 Ghent 9.4% 3,475 13.0% 2,805 BA 13.7% 1,093 SK* Banská Bystrica 9.9% 1,843 -0.2% 1,088 Košice 2.2% 1,720 BG Varna 0.7% 837 1.1% 4,394 Burgas 2.7% 863 ES* 5.5% 5,763 HR 0.7% 1,731 -9.3% 2,378 Prague 10.2% 3,395 (inner) -0.2% 7,699 CZ Brno 10.0% 2,500 London (outer) 0.2% 5,732 UK Ostrava 1.8% 1,683 Birmingham 0.7% 3,294 2.5% 6,235 Manchester 4.9% 2,868 DN -4.7% 4,395 Odense 5.1% 3,368 % Annual change Average transaction price of a new dwelling Paris -0.4% 12,863 Ile-de-France 3.3% 5,187 * bid price ** older dwellings # detached houses FR Lyon 4.7% 4,467 9.2% 4,521 Source: Deloitte national offices 4.5% 3,516 10.0% 5,478 14.9% 5,745 DE Münich 5.8% 8,250 Frankfurt 13.2% 6,960 Average Transaction Among central European cities, Prague was In terms of year-on-year changes, prices in Budapest 13.7% 2,107 the most expensive in terms of purchasing in Norway grew the most between HU Győr 14.5% 1,368 Price of a New Dwelling a new dwelling in 2019 with 3,395 EUR/sqm. 2018 and 2019, by 24.6%, followed by Porto Debrecen 14.1% 1,266 in Selected Cities Bratislava places second by over 500 EUR with an increase of 20.1%. Another 15 cities -1.8% 2,381 (2,805 EUR/sqm). recorded a double-digit growth last year. IE 0.9% 1,774 Paris was again the most expensive city 0.0% 1,853 in our publication in terms of transaction Niš from Serbia and Varna and Burgas from On the other hand, prices decreased Tel Aviv 9.4% 9,769 prices of new dwellings in 2019 with Bulgaria were the only three cities with in eleven cities in the comparison. The Jerusalem IL 16.7% 6,212 12,863 EUR/sqm. There was a slight price levels below 1,000 EUR/sqm. A square deepest falls could be seen in Alicante 5.0% 3,832 decrease by 0.4% in comparison to 2018. meter of a new dwelling in Niš cost only (-9.3%) and Oslo (-9.0%). 2.5% 3,729 790 EUR and was the cheapest among the IT Rome -1.8% 3,259 No other participating city had prices examined cities in 2019. Varna and Burgas The average price across all the examined -0.3% 1,947 over 10 000 EUR/sqm, but Tel Aviv recorded 837 EUR/sqm and 863 EUR/sqm cities was 3,758 EUR/sqm. From 67 cities, -3.1% 1,690 respectively. 26 had above average price level and 41 LV and Luxembourg City came close with Jurmala -3.5% 2,265 9,769 EUR/sqm and 9,565 EUR/sqm were below the average. Milan and Haifa Luxembourg City 8.1% 9,565 respectively. Six cities, Ghent in Belgium, Münich in were the closes to the average price with LU Esch-sur-Alzette 15.3% 6,881 Germany, Tel Aviv in Israel, Milan in Italy, a deviation of 35 EUR/sqm and 68 EUR/sqm Differdange 12.6% 5,766 Only two more cities, Münich (8,250 EUR/sqm) Jurmala in Latvia and Barcelona in Spain respectively. 3.5% 5,315 and London (7,699 EUR/sqm), overcame were the most expensive cities in their NL** 8.4% 2,748 the 7,000 EUR/sqm threshold. Relatively respective countries, despite the fact that The Hague 7.3% 2,954 large differences in prices in the most they are not capital cities. Oslo -9.0% 6,304 expensive cities in the publication might NR# Bergen 24.6% 5,615 indicate that these cities are the most Trondheim 8.7% 5,033 attractive on their home markets and in 8.4% 2,115 Europe as a whole and they attract people Wroclaw 10.0% 1,731 from all around the world, which pushes PL Lodz 9.0% 1,360 housing prices higher. Krakow 11.5% 1,813

18 19 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Comparison of the Main Cities to the Country Average (country average = 100%), 2019

Vienna 117% Lisbon 336% PT AT Graz 85% Porto 191% Linz 96% Belgrade 132% Brussels 130% RS Novi Sad 87% BE* Antwerp 131% Niš 63% Ghent 135% Bratislava 158% BA Sarajevo 129% SK* Banská Bystrica 104% Sofia 198% Košice 97% BG Varna 152% Madrid 183% Burgas 157% ES* Barcelona 240% HR Zagreb 104% Alicante 99% Prague 130% London (inner) 199% CZ Brno 96% London (outer) 148% UK Ostrava 65% Birmingham 85% Copenhagen 200% Manchester 74% DN Aarhus 141% Odense 108% < 1 0 0 % > 100% Paris 284% Ile-de-France 115% * bid price ** older dwellings # detached houses FR Lyon 99% Marseille 100% Source: Deloitte national offices Lille 78% Berlin 147% Hamburg 154% DE Münich 221% Frankfurt 187% The proportion of prices in selected cities Moreover, price levels in Manchester, Lille, Budapest 143% and in their respective countries serves Differdange, Turin, Graz, Birmingham, HU Győr 93% as an indicator of how demanding it might Debrecen, Novi Sad and Lodz were all Debrecen 86% be for citizens of each country to relocate lower by 10% - 30% than the national Dublin 149% into one of the main cities if they want to average. This might indicate that despite IE Cork 111% acquire their own dwelling there. the fact that they are important for their Galway 116% countries’ economies, they are not the Tel Aviv 252% The highest disproportion in 2019 could be most attractive places to live. IL Jerusalem 160% observed in Portugal, where price levels in Haifa 99% Lisbon were 336% of the national average. In terms of price equality in each Milan 161% It was the only city in the publication to participating country, Austria and IT Rome 141% be over three times as expensive as the Luxemburg displayed the lowest average Turin 84% national average. deviations from national average with Riga 103% LV 12% and 19%. Further, Latvia, Poland, Jurmala 138% An average price per square meter of a Hungary, Slovakia, the Czech Republic, Luxembourg City 134% new dwelling cost more than two times the Ireland, Serbia, Bosnia and Herzegovina LU Esch-sur-Alzette 96% national average in Paris (284%), Tel Aviv and Belgium had all an average deviation Differdange 81% (252%), Barcelona (240%), Münich (221%), between 20% and 30%. Amsterdam 202% Amsterdam (202%) and Copenhagen NL** Rotterdam 104% (200%). The highest average deviation was The Hague 112% reported in Portugal, where Lisbon and Oslo 153% Ostrava in the Czech Republic and Niš in Porto were by 164% more expensive than NO# Bergen 136% Serbia are the two cities with the lowest the national average. Portugal was the Trondheim 122% ratio to their respective national averages only country to exceed the 100% mark, Warsaw 139% with 65% and 63% respectively. Germany on the second place had an Wroclaw 114% PL average deviation of 77%. Lodz 89% Krakow 119%

20 21 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Average Transaction Price of New Dwellings in Capital Cities, annual change

Oslo# Capital cities are usually the most A continued upward development of -9.0% important and the biggest markets in prices was apparent in central European Riga individual countries. For better illustration countries, among which Budapest -3.1% of transaction price development across recorded the highest growth (13.7%), Rome Europe, we analysed the annual price followed by Bratislava (13.0%), Prague -1.8% changes in them. (10.2%) and prices in Warsaw grew by 8.4%, Dublin which is still a strong increase. -1.8% In comparison with annual changes Paris between 2017 and 2018, an overall Prices grew the fastest in Jerusalem, the -0.4% slowdown was apparent across the capital of Israel, where a square meter of selected markets. Last year, two countries a new apartment in 2019 was 16.7% more Sofia had a price increase of over 20% and expensive than a year before. -0.2% only Rome recorded a decrease, in the London (inner) current edition, only one city had a growth -0.2% over 15% and seven cities saw a price Brussels* correction. In 2019, an overall slowdown across 0.0% Zagreb The biggest price fall between 2018 participating countries was apparent 0.7% and 2019 was in Oslo, where prices of detached houses decreased by 9.0%. New Madrid* in comparison with 2018. apartments in Latvian capital Riga were 1.1% 3.1% cheaper than a year before and 1.8% Belgrade decreased was recorded in both Rome and 2.4% Dublin. For Rome, it was a second year in Copenhagen a row with a price decrease. 2.5% Vienna Paris and London, two of the most 3.4% important residential markets in Europe, both saw a stagnation in new property Amsterdam** prices, with price changes of -0.4% and 3.5% -0.2% respectively. Luxembourg City 8.1% Warsaw 8.4% Lisbon 8.4% Berlin 10.0% Prague 10.2% Bratislava* 13.0% Budapest 13.7%

Sarajevo Annual change 13.7%

Jerusalem * bid price 16.7% ** older dwellings # detached houses

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% Source: Deloitte national offices

22 23 14

12

10

8

6

4

2

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Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

0

Affordability14 of Own Housing Multiple of annual gross salaries to purchase a 70 sqm dwelling

12 11.4 11.3

10.0 9.9 10 8.9 8.7 8.2

8 7.7 7.6

6.8 6.5 6.2

6 5.6 5.0 5.0

4.1 4.0 4

2

0

CZ RS AT SK* LV IL HR PL HU BA UK IT NL** BG NO# BE* PT

* bid price ** older dwellings # detached houses

Source: Deloitte national offices

200% Affordability of Own the participating countries, being by only and 4.1 multiples of yearly earnings needed one tenth of a year more affordable than to purchase a dwelling in 2019 respectively. Housing the Czech Republic. Even though housing However, the difference between gross and 160% prices in Serbia were one of the lowest, the net salary in Belgium is bigger than in most To assess the affordability of own housing difference between them and the average of other countries, which may distort the in participating countries, we calculated the salary were higher than in most of the other results. number of average gross annual salaries selected countries. 120%needed to purchase a standardised new Generally, prices of dwellings in most dwelling in each country. We assume an Potential buyers in Austria and Slovakia countries grew faster than average salaries average apartment with area of 70 square had to spend around ten times the average in 2019, which translated into lower meters. annual salary to purchase a 70 square meter affordability of housing. The change was 80% dwelling. between 0.2 and 0.4 years in most of the Similarly as in the previous edition, the least participating countries. affordable own housing was in the Czech A relatively affordable own housing can Republic, which occupied this position for 40% be found in Norway, Bulgaria and the Dwelling stocks across European countries the fourth time in a row. Buyers in the Czech Netherlands, where a standardised dwelling differ in size and structure. Our indicator Republic needed 11.4 average annual salaries could be purchased for a price between tries to provide a way to compare to purchase a standardised dwelling. 5 and 6 times the average annual salary. affordability across participating countries. 0% However, the chosen 70 sqm dwelling does Serbia, a new entrant to the publication, had The best affordability rates were, as in the not reflect the structure of apartments in the second least affordable housing among last year, in Portugal and Belgium, with 4.0 every country properly.

24 25

5%

4%

3%

2%

1%

0% Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Rental market Luxembourg was the most expensive prices that resulted in a rent freeze starting Prague (12.31 EUR/sqm) placed second Austria (AT); Italy (IT); country to rent an apartment in 2019, from February 2020. However, the average before Budapest (11.59 EUR/sqm) and Belgium (BE); Latvia (LV); The position of rental housing is becoming as all three cities, Luxembourg City rental price was 9.10 EUR/sqm, which is Bratislava (11.02 EUR/sqm). stronger, especially in capitals and other (30.71 EUR/sqm), Esch-sur-Alzette comparable to regional cities in Central Bosnia and Herzegovina (BA); Luxembourg (LU); main cities across participating countries. (21.80 EUR/sqm) and Differdange Europe, such as Brno (9.62 EUR/sqm), Newly provided data from Balkan Bulgaria (BG); Netherlands (NL); We believe that rental housing forms a vital (19.96 EUR/sqm), placed among the ten Košice (9.45 EUR/sqm) or Lodz countries (Bosnia and Herzegovina, part of the residential market and therefore most expensive cities. (9.26 EUR/sqm). Bulgaria, Croatia and Serbia) show, that Croatia (HR); Norway (NO); we would like to keep providing the general this part of Europe is comparatively Czech Republic (CZ); Poland (PL); market with relevant information about In total, five cities recorded an average Besides Berlin, Vienna is another the most affordable in terms of rental Portugal (PT); rental markets across Europe. rent per sqm of at least 25 EUR in 2019. with comparatively low rents, 9.90 EUR/sqm, housing. Sarajevo, capital of Bosnia and Denmark (DK); Luxembourg City was followed by Paris and relatively high property prices. Herzegovina, and Sofia, the Bulgarian France (FR); Serbia (RS); After two years at the position of the most (28.30 EUR/sqm), inner London capital, are on the last two places of our Germany (DE); Slovakia (SK); expensive city in our selection, Paris had (27.02 EUR/sqm), Oslo (25.80 EUR/sqm) Among central European countries, list with 4.08 EUR/sqm and 4.10 EUR/sqm lost its position to Luxembourg City with and Dublin (25.00 EUR/sqm). the Polish capital Warsaw recorded the respectively. Hungary (HU); Spain (ES); and 30.71 EUR/sqm rent. It is the only city highest average rents per sqm in 2019 with Ireland (IE); United Kingdom (UK). with average rent over 30 EUR/sqm in the Berlin, the capital of Germany, had 16.65 EUR, which is even higher than the publication. witnessed protests against rising rental average rent in Münich (16.40 EUR/sqm). Israel (IL);

Source: Deloitte national offices Average Monthly Rent (EUR/sqm)

35

30.7

30 28.3 27.0 25.8 25.0 25

21.8 21.1 20.7 20.0 19.9 20 19.3 19.2 18.9 18.6 18.4 18.1 17.3 16.7 16.4 16.4 16.3

15 14.3 13.7 13.4 13.3 13.0 12.9 12.8 12.5 12.3 12.0 11.8 11.8 11.7 11.6 11.5 11.5 11.1 11.0 11.0 10.5 9.9 9.7 9.6 9.6 9.5 9.5 10 9.3 9.1 9.1 8.7 8.6 8.6 8.0 7.0 7.0 6.9 6.7 6.4 6.0 5.0 5 4.1 4.1

0 Niš Lille Linz Oslo Graz Cork Lodz Lyon Győr Brno Paris Sofia Turin Haifa Porto Milan Rome Berlin Ghent Košice Dublin Lisbon Vienna Prague Aarhus Bergen Madrid Galway Münich Krakow Tel Aviv Odense Ostrava Alicante Warsaw Brussels Antwerp Sarajevo Wroclaw Novi Sad Belgrade Marseille Frankfurt Hamburg Budapest Debrecen Bratislava Jerusalem Barcelona Rotterdam The Hague Trondheim Amsterdam Differdange Manchester Birmingham Copenhagen Ile-de-France London (inner) London (outer) Banská Bystrica Esch-sur-Alzette Luxembourg City

26 27 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Average bid price of Average transaction Average bid price of Average transaction new dwellings – sqm price of new older dwellings – sqm price of older dwellings – sqm dwellings – sqm

Austria NA 4,176 NA 2,930

Belgium 2,632 NA NA 1,950

Bosnia and Herzegovina NA 849 NA NA

Bulgaria NA 550 NA NA

Croatia NA 1,664 NA NA

Czech Republic 3,364 2,602 1,872 1,534

Denmark 3,280 3,124 2,645 2,519

France NA 4,523 3,427 3,414

Germany 3,727 NA 2,641 NA

Hungary 1,549 1,475 849 808

Ireland NA 1,694 NA 1,694

Israel NA 3,882 NA 4,533

Italy 2,677 2,314 2,140 1,850

Latvia NA 1,646 NA 562

Luxembourg 8,643 7,145 6,596 6,057

Netherlands NA NA 2,857 2,632

Norway# NA 4,120 NA 4,374

Poland 1,602 1,520 1,539 1,348

Portugal NA 1,162 NA 1,023

Serbia 1,388 1,249 1,320 1,188

Slovakia NA NA 1,770 NA

Spain 2,860 2,398 1,653 1,531

United Kingdom NA 3,861 NA 3,057

# detached houses

Source: Deloitte national offices

28 29 14

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14

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2 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020 0

0

Total Outstanding Residential Loans to Disposable Income of Households Ratio (%), 2018

200% 187.6%

Mortgage 200% 167.2% 159.9% 160% 144.8% Markets in Europe 160% 120%

97.7% 95.6% 120% The mortgage market is a vital part of 2019 was another strong year in terms 76.0% 80% the residential property market in each of economic growth, which allowed 68.5% 68.5% 68.5% 66.9% country. One of the most important some of the central banks, especially indicator on the residential market is in countries outside the Eurozone, to 80% 50.1% 48.0% the indebtedness of households, i.e. the increase their benchmark interest rates. 40.2% 40% 34.6% 32.2% proportion of the outstanding volume of This consequently creates a pressure on 23.2% 18.1% all mortgage loans issues to households the mortgage interest rates. However, 15.1% 40% to households’ disposable income. the European Central Bank kept its

Consequently, the ability of households interest rates on the virtual zero, which 0% to take on new debt is one of the was introduced in 2016. This allowed determinants of house price growth. some commercial banks in the Eurozone NL DK NO LU UK BE IE FR DE PT ES AT SK CZ PL IT LT HU BG 0% countries to push the interest rates on The residential debt to households’ mortgages to record minimums in an Source: Hypostat 2019 disposable income ratio in Bulgaria and attempt to acquire new clients. Hungary, where the level is below 20%. Average mortgage interest rates in Countries with a low level of mortgage Portugal, France and Slovakia were below indebtedness proportion (under 50%) 1.5% and even being close to the 1% mark Average5% Mortgage Rate (%), 2019 are mainly located in Central and Eastern in case of Portugal (1.06%). Europe, with exception of Italy. These 5% countries are Latvia, Poland, the Czech The average mortgage interest rates 4.6% Republic and Slovakia. increased only in five analyzed countries 4% (the Czech Republic, Hungary, Latvia, 4.1% Four countries have an indebtedness ratio Norway and Portugal), with the majority of 4% 3.8% of over 100%. The countries are Luxemburg them not being part of the Eurozone. 3% (145%), Norway (160%), Denmark (167%) 3.0% 3.0% and the Netherlands with the highest ratio Hungary, Ireland and Poland are the only 2.9% 2.9% 3% 2.8% recorded at 188%. countries in our publication to have average 2.7% mortgage rates above 3%. Mortgages in 2% 2.3% In most of the analysed countries, the Poland cost 3.8% on interest annually, 4.1% 2.2% 1.9% residential loans to disposable income in Ireland and 4.6% in Hungary. 1.8% 2% 1.7% 1.7% of households ratio decreases between 1.6% 1.6% 1.6% 2017 and 2018. This might indicate that the Among five countries with the highest 1% 1.4% 1.2% disposable income of households is rising average mortgage rates, four (Hungary, 1.1% faster than the value of debt they are willing Poland, Israel and Croatia) are using their 1% to take or that households are becoming local currencies. This may be the cause of more conservative when deciding on higher rates because commercial banks 0% acquiring properties. source most of their funds in Euros or US dollars. 0%

PT FR SK BE DE AT IT DK LU UK ES NL CZ NO BG LT HR IL PL IE HU

Source: Deloitte national offices

30 31 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Austria

Annex: In 2019, the land register recorded continues to exceed the supply despite meter, and the property may not be sold approximately 49,832 sold apartments. somewhat slower population growth. for a period of 40 years. Moreover, the The transaction value of the The increase in purchase prices can change of the zoning provisions resulted residential properties sold amounted furthermore be attributed to the interest in an increased number of subsidized to approximately 12 bn. EUR, which rate level and rising construction costs. constructions of residential properties, Comments represents an increase of 6.5% over the so that the number of subsidized rental previous year. Vienna accounted for 29% In Vienna, a change in the zoning apartments exceeded freely financed of all apartment sales with a value share provisions under the building Code led rental apartments. of approx. 35%. to lasting uncertainty among developers. In the case of rezoning of "rural" land The possibilities of compensating on Residential Especially in Vienna, also the amount of into land zoned for residential buildings, rising square meter prices and rents newly constructed residential buildings two-thirds of the resulting living space by reducing the size of the apartments exceeded the values of the previous must be publicly subsidized (or at least appear to have been exhausted. years. The upward trend in purchase eligible for subsidy) if the target living However, as long as prices remain high, prices and rents on the Austrian space exceeds 5,000 square meters. This there will not be a trend shift towards Markets residential property market continued has a substantial effect on profitability, larger apartments. in 2019. In particular, in urban areas, as the net rent for subsidized properties the demand for additional living space may not exceed five euros per square

Belgium

Although the increasing risk of various granted increased by approximately 24% autumn holidays, compared to the same factors in the residential property market compared to 2018. However, the number period last year. However, the expected such as tax implications, rising interest of building permits fell by approximately decline in property prices due to the rates and political and/or environmental 10% in 2019, partly because the increase scrapping of the ‘housing bonus’ will be changes, 2018 was followed by another in the number of dwellings in recent years minimal compared to the consequences of record-breaking year. 2019 became the was considerably higher than population the current health crisis. Furthermore, the year in which the Belgian citizens were growth. so called ‘concrete stop’ (putting a halt on the most active ever. The number of consuming unconstructed spaces) that was transactions rose by an impressive 9% The remarkable increase in the number of discussed in 2018 was suspended in 2019 (including both houses and apartments). transactions is due to several aspects. On and transformed into a vague ‘concrete Also, the residential real estate prices the one hand, the sustainability standards shift’, with no or limited expected impact in recorded a notable increase of 4%, with the for rental homes became much stricter. the medium term. most pronounced increase in the sector As a result, the necessary adaptations, of normal houses. Rents followed a similar particularly in older apartments in the In addition to these causes, the low interest trend, with especially a substantial increase lower segment, became a capital-intensive rates, confirmed by the ECB to remain in the Brussels Capital Region of more than matter. This resulted in owners selling this low in the upcoming years, ensured 6%. These increases are all significantly their properties rather than renovating that the property market remained higher than the inflation of around +1.4%, them. On the other hand, it was mainly an interesting and stable investment which is no surprise. It was also a record the suppression of the ‘housing bonus’ landscape. Unemployment rates continued year for the number of mortgage loans. (the tax advantage of owning a house) end to fall compared to 2018 and the possible Even though, the BNB/NBB restricted the of 2019 in Flanders that had the greatest increase in tax rates on home ownership leverage ratio for investment real estate impact on the number of transactions. In also failed to materialize. From a political to 80% and imposed more regulations on the last quarter of 2019, the number of perspective, this will most likely not change granting mortgage loans, with €46.2 billion transactions increased by 25%, with even in the short term now the government is (including refinancing), the amount a temporary peak of 122% during the concerned with the current health crisis.

32 33 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

from 10,619 EUR in 2015 to 13,270 EUR growth was recorded. In addition, was the Government housing subsidy Bosnia and Herzegovina in 2019. In the same period, average revenue generated from tourism has program. According to the program, the net salary in Croatia increased from increased by 6.4% in 2018 (total 10 bn. government provides subsidy amounting 750 EUR in 2015 to 868 EUR in 2019 EUR recorded in 2018), while in 2019 to 30% to 50% of the monthly mortgage Residential market gained additional mortgage loans, fewer initiated new (+15.6%). 8% growth is expected according to amount for people under 40 who are momentum in 2019, continuing to follow residential projects, and favorable preliminary data. Positive tourism purchasing their first home. The subsidy 2. Interest rates for newly granted loans the strong growth curve from 2018. economic conditions in European trends had significant impact on the RE is provided for 4 years and is extended continued to fall in 2019 and shifted The main factors behind the positive countries, where the most of the BiH market, being one of the price increase by 2 years for each child born during the towards 3% during mid-2019. This is development have been lower interest diaspora work and live. Prices rose in drivers. However, this effect is not period. This program is effective since in line with the general interest rates' rates on saving accounts and personal average by 5–10% compared to 2018. equally spread throughout the country 2017 and becomes available once or trends in the EU and globally and was as coastal area and Zagreb city are the twice per year for a one-month duration one of the RE price increase drivers. main beneficiaries of these trends. according to the government’s decision 3. During the last few years, Croatia has (usually September and March). Ever recorded a strong tourism growth, Market specifics: since it was introduced, this program has Bulgaria with continued increase in arrivals Apart from the generally positive brought disruptions to the residential and overnight stays. In 2018, total economic situation in Croatia in the last market, as prices tend to rise for the arrivals were 7.1% higher compared few years, one of the important drivers period when the subsidy gets announced The nationwide house price index rose The almost zero interest rates on bank while existing dwelling prices increased to 2017, while in 2019, further 4.8% of the residential property price increase and effective. by 7.3% (3.6% inflation-adjusted) during deposits have encouraged people to by 5.5%. the year to Q1 2019, following y-o-y rises invest in real estate, and encouraged of 5.5% in Q4 2018, 6.3% in Q3, 7.5% in Q2 purchases of pre-construction residential In Burgas, overall house prices rose by 8% and 7.1% in Q1, according to the National property. Sofia, Bulgaria’s capital, saw an during the year to Q1 2019. New dwelling Statistical Institute (NSI). During the latest overall house price increase of 9.5% y-o-y prices rose by 9.6% while existing quarter, house prices increased 2.6% in Q1 2019. Prices for new dwellings rose dwelling prices increased by 5.6%. Czech Republic (1.4% inflation-adjusted) in Q1 2019. strongly by 18.6% while existing dwellings saw a price increase of 5.3%. In Ruse, overall house prices rose by The year 2019 on the Czech residential entire Czech Republic, sales prices of 2020 was expected to be similar to Prices of new dwellings rose by 11.9% 3.3% in Q1 2019 from a year earlier. New market was marked by a continuing rise apartments in development increased 2019, in terms of both development of (8% inflation-adjusted) during the year In , the second largest city in dwelling prices increased by 4.6% while in apartment prices. Although the cooling by 15.4%. Rising prices of apartments in apartment prices and the number of to Q1 2019, sharply up from the previous Bulgaria, we saw house price rise by 7.1% existing dwelling prices rose by 3.1%. in the number of realized transactions Prague and Brno and their immediate transactions. However, this was only valid year’s 2.3% y-o-y rise. During the latest during the year to Q1 2019. Prices of was noticeable, especially in connection vicinity are the main driving force of until March. In the week starting on 16th quarter, prices of new dwellings increased new dwellings increased by 12.6% while In Stara Zagora, overall house prices with the applied regulatory measures the growth. In new development, the March 2020, many things have changed. by 5.7% (4.4% inflation-adjusted). Prices existing dwelling prices rose by 3.9%. increased by 4.4% y-o-y in Q1 2019. concerning housing financing, the increase has been slower, average The real estate world has stopped day by of existing dwellings rose by 5% (1.3% New dwelling prices surged by 9% while expected and often mentioned price transaction price grew by 8.6%. day as fast as the coronavirus pandemic inflation-adjusted) in Q1 2019 from a year Varna, the largest city and seaside resort existing dwelling prices rose by 2.9% corrections did not occur. There was started. Along with the development earlier, lower than the 9.7% y-o-y growth on the Black Sea Coast, recorded an no reason for them, as the demand for Throughout 2019, the mortgage market market, the supply and sales part of the in Q1 2018. Quarter-on-quarter, existing overall house price rise of 4.1% during the owner-occupied housing, especially in was adjusting to the stricter CNB second-hand real estate market gradually house prices increased by 1.1% (-0.1% year to Q1 2019. Over the same period, large Czech cities, remained strong. Only regulation and recorded the worst hibernated. Further development of the inflation-adjusted). prices of new dwellings rose by 1.5% the growth dynamics has adjusted, hence results in five years. Compared to 2018, residential real estate market will depend housing prices have not risen as sharply the total number of provided mortgage mainly on how long the economy will be as in the previous three years. loans decreased by more than 22% to artificially subdued and at the same time, 77,388 contracts. Rising real estate prices what proposals of administrative changes Transaction prices grew year-on-year prevented volumes from falling as much the government will introduce. Croatia in almost all regional cities in the Czech as the number of contracts, yet the total Republic. From the perspective of volume of provided mortgages fell by individual market segments, transaction 16.9% to 181.6 bn. CZK. The volume- During 2019, residential property prices in country’s average. In 2018, average price have increased by 30.9%, from 11,586 prices of apartments rose the most bound average interest rate increased to Croatia continued to follow an increasing per sqm for new dwellings in Zagreb was in 2018 to 15,162 in 2019. This supply in older buildings. At the level of the 2.68%. trend as new dwellings recorded a 7.6% 11.2% higher than the country average, increase could have implications to the RE price increase compared to 2018 on which decreased to 4.0% in 2019. price movement in 2020 if demand levels a country level (from 1,547 EUR to start to shrink. 1,664 EUR). Residential property market Apart from the continued RE price in Croatia has been centered around increase trend in 2019, the increasing Price growth drivers: the country’s capital (Zagreb) and supply trend has also been clear as newly 1. Croatia recorded a continued GDP the coast, with prices in these areas started dwellings (expressed as the growth around 3% yearly since 2015, showing significant deviation from the number of newly issued building permits) while GDP per capita has increased

34 35 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Denmark Germany

In general, 2019 was another good development depends on the location Rising rents, housing shortages and Therefore, price dynamics are no Overall, banks' private housing lending year for the Danish residential market, of the property. In general, buyers a great lack of social housing: The different in 2019 than in recent years: remained very cautious. No significantly where high prices in major cities fueled benefited from decreasing financing German housing market is tense. The prices continue to rise, especially in the more real estate housing loans were increasing demand and development costs and high demand for apartments, country is undersupplied with affordable big cities, which are already expensive. granted. The mortgage lending value of new dwellings in other parts of in particular in Copenhagen, leading housing in the metropolitan areas. In The hoped-for deceleration did not of a property in Germany is still around Denmark. Despite a lower M&A to increasing prices, whereas the the seven largest German cities between occur in 2019. The price increase of real 80 percent. However, there is an volume for commercial and investment development was more stable in Aarhus 2016 and 2018 less than three quarters estate nationwide is around 8%, the increasing spread of real estate financing properties, the yield spread increased in (#2) and Odense (#3). In 2019, there was of the apartments actually needed were prices for building plots have increased in structurally weak regions, which in 2019 due to decreasing interest rates on an increasing concern and uncertainty completed. At the same time, there are by around 11% and the condominiums the event of a recession and due to the government bonds, making investments about the impact of the new taxation many smaller districts concerned with have increased by 10–15%. The prices existing housing offers are prone to in real estate attractive. For logistics and model being developed by the Danish an almost overturned construction of also show the divergence within price collapses. office space, rental levels increased and tax authorities. The new model has new houses and apartments. As there Germany between the structurally weak expected return decreased for prime been postponed several times, and the is a trend towards migration to the regions with partly falling prices and the and secondary locations. The opposite impact is not yet known, which affects cities, especially for younger people, the dynamic markets in metropolitan areas. trend was seen for retail due to online the appetite for acquiring residential demand in the big cities is increasing. shopping. For residential properties, the properties, in particular in major cities.

France Hungary

The French residential market has been Regarding the transaction prices, they have In 2019, the Hungarian house prices comparison, which means that the In 2019, the number of completed very dynamic in 2019, with more than one increased over the last year by 3.7%. This continued to increase, although the transaction prices of new dwellings dwellings increased by nearly 20%. million transactions over the country, i.e. upward trend is observed in the whole number of transactions has started to increased on average by 11.5%, while However, the number of newly issued an 11% annual increase. This high level is country for apartments: 6.6% in the Paris decline for the first time in 6 years. There the older dwellings by 5.5%. The price building permits declined by more than supported by good access to financing, region, but also in other regions (increase were approximately 10% less transactions level reached its peak in Q2 2019 and 4% compared to 2018. The main driver thanks to low-interest rate policy carried of 4.9%). The province area -where the price in 2019 compared to 2018. One of it has started to decline after it. The of increase in the growing housing out by the European Central Bank (ECB). increase has sped up- is driven by major the main drivers of the decline in the transaction market of new dwellings is supply in 2019 was the reduced VAT (5%) cities, which benefitted from significant rise transaction numbers in the cities was the characterized with strong concentration, on housing transactions. However, in However, these easy access conditions to in price such as (13%), Lyon (12%), newly introduced Hungarian Government as nearly 50% of all the new dwellings for January 2020 the VAT was uplifted to 27%, mortgages could/should be affected by Rennes or Strasbourg (10% each). In Paris, Bond Plus (Magyar Állampapír Plusz) sale in Hungary were built in five districts hence the decreasing volume of started the recent announcements of the Haut the price per sqm reached 10,210 EUR in which made the yields on the housing of Budapest and in 12 main cities in the new dwellings. Conseil de Stabilité Financière, which December 2019. market less appealing for investors. In the countryside. recommends limiting the mortgage effort small villages, however, the extension of rate (maximum 33%), and the mortgage The price increase trend can also be the Hungarian Family Housing Support The Hungarian housing prices still duration (maximum of 25 years). observed on the rental market, showing Program (CSOK) still could drive the show higher spatial heterogeneity and the high rental demand (especially in housing market in 2019, which resulted in disparities between individual settlement As of the residential construction sector, large French cities). As a consequence, the a slightly higher transaction numbers in types continued to increase in 2019. The sales have been stable over 2019 with circa appetite from investors should remain villages than in 2018. difference between the average price 130,000 sold housing units. high, despite a more uncertain economic level in Budapest and in the countryside context. Despite the decreasing number of continued to grow and exceeded the transaction, the residential price increase multiplier of 2.5. continued in 2019 in a year-on-year

36 37 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Ireland Latvia

There remained a strong demand for The rising rents continued to make it There was an increase in construction, Latvian real estate sector keeps positive The demand on the residential market According to Latvian information agency, residential housing in 2019, albeit in more difficult for first time buyers to with a greater volume of residential units tendencies in its development. The is determined by several factors. In supply of apartments in Riga went up in a relatively flat pricing environment, save for deposits to meet the Central being delivered to the market, providing residential real estate market have come accordance with immigration law, 2019 by 3% compared to 2018. Mortgage with low levels of price increases, and Banks mortgage lending criteria, some respite in supply shortages to closer to its equilibrium in 2019 with foreigners get a five-year residence permit interest rates have slightly increased in minimal transactional activity. permitting lending at 3.5 times the meet demand. Whilst the volume of units large number of commissioned buildings in Latvia if they buy residential property comparison to 2018 mostly driven by gross salary income, with deposits of delivered, commenced and planning supported by steadily declining population. with a value over 250 ths. EUR. Moreover, Latvian economic growth. Institutional purchasers of residential 10%–30% required (first time buyers at permissions granted were due to attractive rent yields and strong economic (apartment) rental stock dominated 10%, second and subsequent buyers at exceed the previous year’s volume, it is During 2019, 21,205 apartments were growth in Latvia up until Covid-19 outbreak the residential investment market 20%, and buy-to-let buyers at 30%). This understood that output is still far below sold in Latvia, including 9,840 in Riga, improved business environment and with the majority of these purchasers thereby adversely affects the quantum what is required, with the construction reflecting an increase of 2.6% and 6.8% contributed to high demand for residential contributing to build stock, along with of housing stock purchased. shortfall for 2019 alone estimated to be in in comparison to 2018 in Latvia and Riga real estate, which led to 2.3% increase in a small quantum of development stock. the region approx. 15,000 units. respectively. apartment prices compared to 2018.

Israel Luxembourg

A low mortgage rates (below 2%), strong (explained by the significant immigration West of the country). This suggests that Due to significant increase of prices this program are 10–30% lower than similar macroeconomic fundamentals and a very from European countries due to its land prices have affected heavily the over the last years, the government has non-subsidised apartments. As a result, stable political environment drive the dynamic labor market), coupled to a low price of new residential developments implemented a program that subsidises prices are still going up but the curve Luxembourg residential market. Record interest rate environment. In Luxembourg and consequently existing residential land intended for apartment projects has been flatter. Demand is still strong levels have been reached at the end of 2019 City, the average apartment prices have assets as well. which are designated for young couples especially due to significant increase in for Luxembourg residential real estate. risen from 4,400 EUR per sqm in 2010 to and those with low income. In 2018 and population and stagnation in the increase more than 9,000 EUR per sqm in 2019. Between Q4 2018 and Q4 2019, 2019, 20% of the new projects were under of new started dwellings. The Luxembourg residential market has Luxembourgish residential prices have this program. Prices of apartments under been rising sharply especially since the This increase in residential prices was increased by 11% in average. Prices beginning of 2010 (post financial crisis) quite homogenous across the different have increased by 12.1% for existing with an annual average growth (price) of segments (older and new dwellings), but apartments, by 12.4% for apartments 5.7% over the period, mostly due to its with a much stronger increase in urban under construction and by 9.1% for rapidly growing economy and population areas than in rural areas (i.e. North and existing houses. Italy

In 2019, Italian GDP registered a growth households during the period. In turn, the In terms of the number of transactions in of 0.3% compared to 1% reported for unemployment rate slightly decreased residential real estate market the latest 2018. With respect to government debt, in 2019 by around 1.3 p.p. from 10.5% in data available for 2018 reported around Netherlands in 2019 the Government deficit narrowed 2018 to 9.8% in 2019. 580,000 transactions were made, an to 1.6% of GDP from 2.2% of GDP in 2018 increase of around 10% compared to In 2019, the GDP growth of the Furthermore, we have seen a decrease environmental regulations concerning – the lowest government deficit to GDP During 2019, the real estate sector in 2017 – this figure is expected to remain Netherlands was 1.7%, compared to 2.5% in the average mortgage interest rate nitrogen and other emissions, which achieved since 2007. Italy remained essentially stable with stable when the figures for 2019 are in 2018. The urbanisation rate keeps from 2.4% in 2018 to 2.3% in 2019, caused numerous building projects to be an increase in demand in line with the reported. rising with people moving more and further increasing the demand for postponed. In addition, 2019 saw rising Residential household consumption increase in residential construction more to (big) cities. Amsterdam, being dwellings and subsequently increasing construction costs and municipalities not expenditure grew by around 0.5% in activity. Towards the end of 2019, the the capital and financial center of the the average transaction prices. While clearing enough land for housing, which 2019. The stabilization of unemployment market outlook pre COVID ranged Netherlands, is at the forefront of this the current market conditions of had a negative effect on the number of and an increase in wages in the country from general stability to continued trend. While the increase in the average increasing transaction prices still indicate started dwellings. supported the purchasing power of improvement in the sector. transaction prices in Amsterdam (6.9%) a shortage of housing, the number of has been slowing down, cities like Utrecht started dwellings is lower compared (9.7%), The Hague (9.2%) and Rotterdam to last year. The decrease in started (9.0%) have been catching up. dwellings is mainly caused by additional

38 39 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Norway Portugal

The Norwegian residential market represents a year-on-year increase The Government introduced a debt Similarly to the previous year, the the median value of dwelling sales 50% of the demand for the country’s displayed a prolonged period of of 2,057 properties (2.2%) and circa register and new credit regulations Portuguese residential segment increased by 13% to 3,179 EUR per residential market. moderate price development in 2019. 24 bn. NOK (7.4%). Average transaction for consumer loans in 2019, which is continued to be a hotspot market of the sqm during 2019, 10 p.p. less than the This was largely driven by strong labour prices increased by 1.9% and 3.5% expected to dampen purchasing power to country’s economy. Although the selling increase of the previous year. Porto This year’s new development projects market and wage growth, balanced for new- and existing dwellings, some extent. This in combination with the prices were still at their peak, there was registered a much lower value of were typically larger and built in housing construction in combination with respectively. However, there are clear aforementioned extension of mortgage a slight deceleration in the price increase 1,771 EUR per sqm, increasing 19% since peripheral zones and greenfield plots. three rate hikes by the Central Bank and regional differences. While the level of regulations is likely to limit the upside of throughout 2019 fueled by a rise in the the preceding period, 5 p.p. less than the On a less positive note, construction continuation of the mortgage regulations construction nationally is well balanced housing prices. supply and a wider range of options for increase in 2018. costs remain high and lengthy licensing introduced in January 2017. with household growth, Oslo has a long- buyers. processes continue to complicate new term challenge with regulating enough Regarding the demand for the segment, projects’ developments. During the whole of 2019, the number areas for development to meet housing Lisbon continues to be the most dynamic the low mortgage rates led to an of dwellings transferred as free demand. region in Portugal comprising 22% of increased volume of credit granted market sales were 89,632, amounting the total 14,366 completed dwellings for and consequently a rise in the number to approximately 356 bn. NOK. This family . Additionally, of Portuguese buyers. Nevertheless, according to INE, in Lisbon City Center foreigners still represented more than

Poland Serbia

The year 2019 turned out to be another Despite the price increase, the demand The value of the real estate market in Prices for new residential developments record-breaking year on the residential remained strong. In 2019 a total of Serbia records a constant growth, which increased significantly in the last three market in Poland, despite rising land 65,400 new apartments were sold in the started in 2016. years. This is predominantly fueled by high prices, limited availability of development six largest markets. Individuals buying demand and low supply of new dwellings, plots, prolonged administration flats for themselves as well as investors According to the State Geodetic Survey which resulted in increase of sale of new procedures and rising construction costs. purchasing apartments for long or Office (RGZ), in 2019, total value of the real apartments (11% in 2018 and 15% in first short-term lease drove the demand. This estate market in Serbia was 4.2 bn. EUR half of 2019 as per RGZ’s statistics). In terms The number of newly delivered reflected a positive situation in the labour with approx. 104,919 properties sold. Total of financing, cash buyers (69%) prevail over apartments exceeded 200,000 for the market, growth of wages and savings value of real estate sold in 2019 was 12% mortgage buyers (31%) in the purchase of first time in history and was nearly 12% as well as the remarkably low interest higher than in the same period in 2018. new apartments. higher than in 2018. At the same time rates existing on the market for a long Serbia’s capital Belgrade holds a convincing number of commenced dwellings was time (meaning cheap mortgages and first place in terms of growth with 2.2 bn. In the period January–September 2019 6.9% higher year-on-year and the number unprofitable bank deposits). EUR spent followed in second place by Novi the Belgrade City authorities have of issued building permits increased by Sad with close to 470 mil. EUR, then Niš issued building permits for development approximately 4.4% when compared with At the same time, rents for flats remained (111 mil. EUR) and Subotica (78 mil. EUR). of further 600 000 sqm of residential 2018. relatively stable, usually fluctuating properties which will be delivered to the between +/-3% when compared with the The most sought-after on Serbia’s' real market over the next 2–3 years. Within recent years we have observed corresponding period of the previous year. estate market are by far apartments with continuous increase of prices, which in 35% share on the market, whereby their selected cities reached a two-digit value sales value reached 1.9 bn. EUR in 2019 or and in all major cities, prices increased 47% of total market value. Residential real circa by 9.7% in case of primary market estate prices are constantly rising, in both and 10.1% in case of older dwellings. old and new properties.

40 41 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Slovakia

The Slovak residential market witnessed The demand and prices on the residential The imbalance between supply and strong demand and the insufficient market are strongly stimulated by these demand in the market may narrow in offer of new development projects factors: the near future, especially in the capital and apartments for sale. Demand was of Slovakia due to interesting number of • continued lack of new apartments supported mostly by low interest rates new planned project or projects already supplied to the market, on mortgages, which as a result led under construction and due to regulatory to rapidly rising prices in 2019. Prices • culmination of the impact of the measures applied by the central bank. increased evenly throughout the year in regulatory measures of the National This has potential to alleviate increasing all major cities. Bank of Slovakia, pressure on prices.

• low interest rates on new mortgages

Spain

Despite the slowdown trend of the For the first time since 2013, the housing Housing production has increased by global economy in 2019, Spain remained transactions have decreased. New 5.6% in the last year, with around 3,500 as one of the leading economies. GDP, housing transactions have fallen slightly, new active developments and 168,000 unemployment and the demographic whilst second housing transactions have housing units. The average sale price of pattern showed figures, which were decreased by 2.5%. Despite there is an the sample has continued to increase representative of a mature market. In obvious impact coming from the new to 2,860 EUR per sqm in exchange for 2019, Spanish GDP growth was 2%, 0.8 p.p. Spanish mortgage law (approved in July building smaller houses. These high above the Eurozone. However, Spanish 2019), the current RE cycle is showing sale prices had affected the demand, so GDP per capita remained below the signs of stabilization. Regarding sale HPA growth seems to converge now to EU-28 as constant level. With regard to prices, after years of high increases, HPA sustained levels. the population, since 2016 there has been growth is pointing out toward sustained a positive trend (469,000 new residents, levels. In 2019, open market sale price Furthermore, the new residential market although mostly due to foreigners). has increased, on average, by 3.4%. The context has generated growing interest in Both youth unemployment and salary gap between new and second hand the Private Rented Sector. stagnation are still main challenges of the housing sale prices had increased even Spanish economy that could considerably more compared to previous years, which affect to the residential market. affects the new housing demand.

United Kingdom

Demand in the UK property market was and with some of the biggest drops in the low levels of activity. The Royal relatively subdued over the course of London’s most expensive neighborhoods. Institution of Chartered Surveyors 2019, with a spike at the end of the year However, outside London, 2019 was (RICS) expected an increase in prices as residential property strengthened in a year of some growth for the regions. and rents as a consequence of the response to the political certainty provided imbalance between rising demand and by December’s general election result. There still remains a gap between falling supply. Before the Coronavirus instructions and enquiries, suggesting pandemic, their projections were around October 2019 saw the 20th month of that supply is falling faster than 2% rental growth over 2020, anticipated decreases for London property prices demand. This has helped maintain to accelerate to average closer to 3% per since 2017, down 1.6% year-on-year prices at their current level, despite annum over the next five years.

42 43 Property Index | 9th edition, July 2020 Brochure / report titleProperty goes here Index | Section| 9th edition, title goes July 2020here

Contacts

Austria Germany Norway Gebriele Etzl Michael Müller Thorvald Nyquist +43 1 513 09 13 +49 89 290368428 +47 957 53 141 [email protected] [email protected] [email protected]

Belgium Hungary Poland Frédéric Sohet Gábor Kohári Maciej Krasoń +32 2 639 49 51 +36 1 428 6800 +48 225 110 360 [email protected] [email protected] [email protected]

Bosnia and Herzegovina Ireland Portugal Sabina Softić Vincent Sorohan Jorge Marrão Souza +387 33 277 560 +353 1 4178849 +351 963 902 674 [email protected] [email protected] [email protected]

Bulgaria Israel Serbia Reneta Petkova Doron Gibor Dejan Mrakovic +359 2 80 23 300 03-7181819 +381 11 3812144 [email protected] [email protected] [email protected]

Croatia Italy Slovakia Mario Tešanović Elena Vistarini Jozef Suchý +385 1 2351 900 +39 028 332 512 2 +421 918 642 123 [email protected] [email protected] [email protected]

Czech Republic Latvia Spain Miroslav Linhart Valters Tucs Javier Parada +420 737 235 553 +37 167 074 143 +34 915 145 000 [email protected] [email protected] [email protected]

Denmark Luxembourg United Kingdom Tinus Bang Christensen Lize Griffiths Chris Baldwin +45 30 93 44 63 +352 621 505 576 +44 (0)20 7303 3385 [email protected] [email protected] [email protected]

France Netherlands Laure Silvestre-Siaz Jurriën Veldhuizen +33 155 612 171 +31 882 881 636 [email protected] [email protected]

44 45 Property Index | 9th edition, July 2020 Property Index | 9th edition, July 2020

Authors

Residential Market

Miroslav Linhart Petr Hána Igor Zsebik Partner Senior Manager Senior Analyst Real Estate Advisory Real Estate Advisory Real Estate Advisory +420 737 235 553 +420 731 638 268 +420 730 587 978 [email protected] [email protected] [email protected]

Economic development in Europe

David Marek Director Financial Advisory +420 606 656 599 [email protected]

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