Housing prices are overvalued and the upward trend persists in several European Union countries, such as Bulgaria, Spain, Latvia, Portugal and Slovenia, according to the European Commission report for macroeconomic imbalances in Europe for 2024.
This warning signal raises the concern that the evolution of prices in these countries could represent a significant risk for a future sharper correction, especially if economic conditions worsen, with housing prices being heavily overvalued in Portugal, warns Brussels.
The panorama of the European real estate market underwent significant transformations in 2022: the reduction in house prices accelerated throughout the year, resulting in a year-on-year decrease of almost 1%. According to the European Commission, at the beginning of 2023, there was a moderation in the correction of house prices. However, despite the slowdown, concern persists about a 19% increase in house prices by 2022. This growth has moderated in recent quarters, but prices remain high.
According to the EC, despite robust growth in recent years, estimates suggest that housing prices are in line with fundamentals;
The estimates suggest that housing prices are in line with fundamentals, considering that, in the medium term, the considerable increase in housing prices has been accompanied by a proportional growth in incomes.
Household indebtedness remains worrying
Household indebtedness in Portugal, Germany, Spain, Malta, Austria, Greece, Italy and Estonia continues to be a cause for concern, with levels ranging from moderate to high. The high percentage of variable rate loans in Estonia, Malta, Portugal, Austria and Italy adds a layer of uncertainty. The low savings rate in Greece, Estonia and Portugal intensifies financial vulnerability.
In the medium term, eight Member States of the European Union are assessed as facing high budgetary sustainability risks. They include Belgium, France, Greece, Hungary, Italy, Portugal, Slovakia and Spain. According to the EC, this analysis raises serious concerns about the ability of these countries to maintain long-term financial sustainability;emphasizing the need for careful management of public finances in order to avoid broader economic complications
Portuguese financial situation is improving
The Portuguese financial situation is improving, says Brussels, with a reduction in the ratio of public debt to Gross Domestic Product (GDP). The country's financing needs are decreasing, reaching a moderate level. The report's forecasts show that the public balance should become positive in 2023 and remain in surplus in 2024 and 2025. These indicators reflect a positive trend in the stability of Portugal's public finances in the coming years.