Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte

Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
Property Index
Overview of European
Residential Markets
Affordable vs. Luxury Living
7th edition, September 2018
Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
Property Index |
                7th edition, September 2018                                                                      Property Index |
                                                                                                                                  7th edition, September 2018


Introduction                                                                 03   Property Index, Overview of European Residential
Highlights                                                                   05   Markets, with its six-year history, has become one of
                                                                                  the most important European real estate publications.
Economic Development in Europe                                               06   In this context, we are pleased to present to you the
Trends                                                                       08   seventh edition.
Focus: Affordable vs. Luxury Living                                          10
                                                                                  Property Index analyses factors influencing the
Comparison of Residential Markets – Housing Development Intensity            12   development of residential markets and compares
Comparison of Residential Property Prices in Selected Countries and Cities   17   residential property prices in selected European
Mortgage Markets in Europe                                                   30   countries and cities.

Annex: Comments on Residential Markets                                       32   Our goal is to provide you with European residential
Contacts                                                                     38   market data on a regular basis and answers to
Authors                                                                      39   questions on how Europeans live and at what costs.

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
Property Index |
                7th edition, September 2018                                                                                                                                  Property Index |
                                                                                                                                                                                              7th edition, September 2018

To summarise all important outputs
from our research we outlined in the
introductory part the key trends we
                                               Most presented indicators are on a year-on
                                               year basis and are to some extent also
                                               influenced by geopolitical situations or
                                                                                               Highlights                                                   16,512 EUR
believe resonate on the residential            various factors affecting the volume of
market the most. Two of them are               supply and demand.                                                                                           Inner London was again the most expensive city
further elaborated in greater detail                                                                                                                        among surveyed cities with a price tag reaching
in the focus chapter in order to be a          Property Index was prepared by a proven                                                                      16,512 EUR/sq m. Living outside of Inner London
bigger subject in public discussion.           international and cross-functional team of                                                                   was cheaper, however, still above average
                                               Deloitte professionals in the development,                                                                   amounting to 6,841 EUR/sq m.
As in the previous year, we especially focu-   mortgage and real estate markets. This
sed our attention on:

•• Austria (AT);
                                               publication has been prepared using data
                                               collected by individual Deloitte offices in
                                               selected countries.
•• Belgium (BE);                                                                                Out of the examined capitals, Madrid
•• Czech Republic (CZ);

•• Denmark (DK);
                                               Property Index capitalises on
                                               Deloitte’s extensive knowledge of the real
                                                                                                showed the highest increase in the
                                                                                                average transaction price of new                                     4,397 EUR
                                               estate and development industry, enabling        dwellings, increasing by 17%.
                                               us to provide you with independent and                                                                                The highest price per sq m was observed
•• France (FR);
                                               credible information.                                                                                                 again in the United Kingdom (4,397 EUR /
•• Germany (DE);                                                                                                                                                     sq m) even despite the price decrease
                                               We hope you will find this seventh issue of                                                                           (-5.0%) compared to the last year due to
•• Hungary (HU);

                                               the publication interesting and inspiring for                                                                         british Pound depreciation. However, in
•• Italy (IT);                                 you and for your business.                                                                                            British pound (excluding exchange rates)
                                                                                                                                                                     house prices increased in the UK.
•• Latvia (LV);

•• Netherlands (NL);                                                                                                     The highest value of the
                                                                                                                         initiated housing develop-
•• Poland (PL);
                                                                                                                         ment intensity indicator was
•• Portugal (PT);                                                                                                        recorded in Austria, where
                                                                                                                         8.6 apartments per 1,000
•• Spain (ES); and
                                                                                                                         citizens were initiated.
•• United Kingdom (UK).

                                                                                                                  1,080 EUR                                                     11 years
                                                                                                                  Debrecen in Hungary was for the third
                                                                                                                  time in a row the cheapest city among                         The least affordable own hou-
                                                                                                                  all observed cities with a price tag of                       sing was for the second time
                                                                                                                  1,080 EUR/sq m.                                               observed in the Czech Republic
                                                                                                                                                                                where citizens need to save
                                                                                                                                                                                more than 11 years to buy a new

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
Property Index |
                7th edition, September 2018                                                                                                                                                      Property Index |
                                                                                                                                                                                                                  7th edition, September 2018

                                                                                           The real unit labour costs remained              Europe still faces geopolitical risks that      productivity. An aging population will add
                                                                                           at the level of the year 2016. In 2017,          could have an impact on its economy.            some pressure to the labour markets and
                                                                                           imports grew slightly more than exports          EU faces threat of tariffs on exports of        could slow down GDP growth as well. While
                                                                                           and consequently the trade surplus of            steel and aluminium products to the             the average growth in the 10 years before
                                                                                           the EU fell from EUR 32bn to EUR 23bn.           USA (potentially also on exports of cars).      the financial crisis (1998–2007) reached
                                                                                           The unemployment rate descended from             Renewed US sanctions on Iran could also         2.6%, expected long-term growth in
                                                                                           its high of 10.9% in 2013 to 7.1% in             indirectly impact European firms. Sanc-         coming years is likely to oscillate between
                                                                                           March 2018.                                      tions against Russia are still in place. The    1.7–2.0%.
                                                                                                                                            United Kingdom entered the process of

                                                                                           Fiscal policy in most European countries         leaving the EU in March 2017. The migra-
                                                                                           remained neutral or tightened in an effort       tion crisis seems to be easing.
                                                                                           to get closer to the long-term sustainability
                                                                                           of public finances. General government           The long-term prospects of the EU and the
                                                                                           deficit declined (or surpluses increased) in     Eurozone are expected to be negatively
                                                                                           23 out of 28 EU countries in 2017.               affected by the slow growth of total factor

Development                                                                                Growth of Real GDP in EU 28

in Europe

                                                                                                                                                                                                        2.6%          2.7%
                                                                                                                     2.1%                                                      2.2%                                                 2.3%
                                                                                                                                  1.7%                             1.6%                    1.8%

The European economy continued to rise in 2017.                                                                                            -0.4%
The growth was slightly faster in comparison
to 2016. GDP in the whole EU-28 increased by
2.6%, the Eurozone rose by 2.5%. The growth was
supported by the ECB’s accommodative policy and
low commodity prices, despite commodity prices
started gradually rising during 2017.                                                      -6%
                                                                                                       2009          2010         2011     2012       2013        2014         2015        2016         2017         2018p         2019p

                                                                                           Source: Eurostat. Forecast: Deloitte
External conditions also improved a bit in     EUR 60bn to EUR 30bn starting from
2017. The US growth accelerated to 2.3%        January 2018. This monthly volume will
from 1.5% in 2016. The Chinese economy         be valid until the end of September. ECB
kept growth slightly below 7%. Japan           policy rates remained on their historical   The housing market is usually sensitive          last 10 years. Thus, the expected sluggish      in the EU will keep interest rates at low
grew by 1.5% (up from 0.9%). Russian and       lows (deposit rate -0.40%, refinancing      to economic conditions, especially GDP           economic growth is likely to limit inflation    levels and together with the steadily falling
Brazilian economies left recession. This       rate 0.00%, marginal lending rate 0.25%).   growth and interest rates. Correlation           in house prices in the coming years. On the     unemployment rate support the housing
positive external environment contributed      Declining interest rates contributed to     between lagged GDP growth and house              other hand, the accommodative monetary          market.
to acceleration of EU economy.                 the growth of consumption expenditures      prices in the EU reached 83% during the          policy of the ECB and other central banks
                                               of households by 2.2% and fixed capital
In October 2017, the ECB decided to            investment by 4.1% in the EU in 2017.
reduce monthly asset purchases from

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
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                7th edition, September 2018                                                                                                                                                                                                              Property Index |
                                                                                                                                                                                                                                                                          7th edition, September 2018

Trends                                                                        3/           Private vs.
                                                                                           institutional investors
                                                                                                                                                                                                                                        9/            Digitalisation
                                                                              As prices have increased over time and returns on
                                                                              properties have become lower in large cities, there
                                                                                                                                                                                                                                        Digitalisation is a buzzword that over-

    1/                                                                                                                                                6/
                                                                              is a tendency for institutional investors to search
                Low interest                                                  for new and more risky local markets to generate                                    Affordable                                                            laps all sectors, including the real estate
                                                                                                                                                                                                                                        market. Traditional market actors are
                rates                                                         higher returns. The low yield environment has                                       living                                                                facing a wave of innovation, such as big
                                                                              pushed pension funds and other conservative
                                                                                                                                                                                                                                        data, the Internet of Things or artificial
                                                                              institutions over to alternative investments, where
    Interest rates are expected to stay low                                                                                                           Affordable housing has become a new                                               intelligence. Users can for example
                                                                              the real estate market is seen as a more “safe hea-
    in the short term. The low interest rate                                                                                                          topic publicly often discussed. Because of                                        independently carry out a cost-efficient
                                                                              ven” when it comes to stable returns to cover their
    environment and the resulting high                                                                                                                reduction in the household size, property                                         initial assessment of a residential pro-
                                                                              long-term liabilities. On the other hand, further
    borrowing capacity will continue to                                                                                                               developers are adapting to this trend by                                          perty through smartphone, tablet
                                                                              expected economic growth, increased wages and
    be the main drivers of the residential                                                                                                            providing smaller units. The government                                           or computer. Established companies
                                                                              low unemployment rate caused greater appetite
    property activity. Uncertainty regarding                                                                                                          also contributes by increasing the social                                         should therefore adapt to new challen-
                                                                              for own housing by private individuals.
    the start of significant interest rate                                                                                                            housing stock and newly tries to cooperate                                        ges and disruptive competitors.
    movements will remain.                                                                                                                            more closely with private investors.

                           2/             Increasing
                                          foreign demand
                                                                                                                                                                                    7/           Rental housing

                           Increasing influence of foreign demand,
                                                                                                                                                                                    Increase in rental housing owing to the

                           especially in large cities, drives the future
                           residential market development. Due to                                                                                                                   attractive offer of jobs in regional capitals,
                           a relatively stable political environment across                          Functional and flexible                                                        flexibility of the liability, and the high prices
                                                                                                                                                                                    of own housing becomes more important
                           Europe, simplicity of international financial
                           transaction flows and cheap money, foreign
                                                                                                     living space                                                                   recently. Also developers are focusing on
                           real estate markets are becoming more con-                                                                                                               rental housing where they construct deve-

                                                                                        Ongoing globalisation, urbanisation and demographic                                         lopment projects with the aim to rent the
                           fident to invest. The foreign inflow of money
                                                                                        changes produce new forms of functional and flexible living                                 future apartments.                                                         Increasing demand
                           may have a positive impact on local econo-
                           mies, however, it also affects the increase of               space. The young generation, also called “millenials“ or                                                                                                               for luxury living
                           residential property prices.                                 “Generation Y“, who are less oriented towards ownership,
                                                                                        often refuse to commit themselves to repaying mortgage
                                                                                                                                                                                                                                            Economic recovery, increasing investment
                                                                                        loans and prefer the „sharing economy“, demand more
                                                                                                                                                                                                                                            appetite and capital-less cross-border
                                                                                        comfortable and attractive living. Developers therefore
                                                                                                                                                                                                                                            transactions in specific regions help boost
                                                                                        turn to projects designed for student or temporary
                                                                                                                                                                                                                                            the demand for luxury living. Developers

    4/                                                                                                                                                        8/
                                                                                        housing in desirable locations close to campuses. Similar
                   Urbanisation vs.                                                     requirements for tailor-made housing are also expanding                            Increase of construction                                         therefore tend to build new projects at
                                                                                                                                                                                                                                            a very high standard to meet the expecta-
                   suburbanisation                                                      among the elderly generation.                                                      and labour costs                                                 tions of even the most demanding clients.
                                                                                                                                                                                                                                            To differentiate themselves from the
                                                                                                                                                              Extensive workload in the construction                                        competition, developers also try to offer
    Population migration within cities varies according to
                                                                                                                                                              industry and a consequently rapid increase                                    new types of living, such as apartments
    European regions. Increasing demand for affordable
                                                                                                                                                              of construction costs in the housing sector                                   with car parking inside the apartments, or
    living space in more peripheral areas and remote dis-
                                                                                                                                                              is one of the key signs recently affecting the                                skyscrapers with incredible views.
    tricts can be observed for example in Austria. However,
    ongoing urbanisation and increased demand for city                                                                                                        residential market. There is also a shortage
    apartments and fully-furnished houses in the centre is                                                                                                    of skilled labour, which causes the incre-
    expected in Germany and Latvia.                                                                                                                           ase in labour costs. Finally, lack of land for
                                                                                                                                                              construction purposes limits residential
                                                                                                                                                              construction in major cities.

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
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                                                                                                                                                                                                                                                                  7th edition, September 2018

                                                                                                                                                  Affordability of Own Housing
                                                                                                                                                  Gross annual salaries for the standardised new dwelling (70 sq m), 2017

Affordable vs. Luxury

Living                                                                                                                                            10                        9.8

Last year we covered the introductory          In order to assess the affordability of one’s     It is clear from the chart on the right that
part with a focus on the rental market         own housing, we measure how many                  the higher the wage, the more affordable
and rental living. This year’s focus deals     average gross annual salaries it takes to         the own housing. Two countries do not
with the housing affordability more deeply     buy a standardised new dwelling (70 sq m):        meet this rule – the United Kingdom and
than in previous years and tries to answer                                                       France. In the UK the highest living costs                                                                                    5.8
                                               •• The most affordable housing can                                                                  6                                                                                  5.6
a question – Is the worsening affordability                                                      can be observed undoubtedly in the long
                                                  be found newly in Belgium, where                                                                                                                                                          5.4
unsustainable in the long-term?                                                                  run and France has similar characteristics.                                                                                                         5.0
                                                  a household needs to save on average
                                                                                                 Although their wages are above average,
                                                  only 3.7 years to buy a new dwelling.                                                                                                                                                                          4.3
To better understand the impact of gene-                                                         making their own living is only for the rich.
                                                  However, the difference between gross
rally increasing house prices in European
                                                  and net salary in Belgium is bigger than
countries and cities it is important to take                                                     From the other perspective rise of luxury         4                                                                                                                         3.7
                                                  in the other countries. In case of net
into consideration how homeowners                                                                development projects has emerged
                                                  salaries overview this would cause the
perceive the prices they have to pay to buy                                                      recently. People are demanding more
                                                  living less affordable.
a home.                                                                                          and more comfort, flexibility, high-quality
                                               •• Belgium is closely followed by Denmark         services and unconventional concepts of
As home ownership has become increasin-           and Germany.                                   living. Noteworthy are for example luxury
gly difficult to access, the term affordable                                                     residential high tower projects with a great
                                               •• In the Netherlands the number of gross
housing appeared. Affordable housing                                                             view or projects with car parking inside the
                                                  annual salaries needed to buy a dwelling
is used to describe dwelling units whose                                                         apartment or even inside the living room.
                                                  of 70 sq m grew to almost 6 years.
the total housing cost of which is deemed
“affordable” to a group of people within       •• Relatively affordable housing, which is up     All major cities in Europe currently face
a specified income range.                         to 6 years of savings, can be found also in    new challenges in meeting the needs of            0
                                                  Spain or Austria.                              luxury clientele as well as to resolve signals
                                                                                                                                                               CZ           UK           FR          PL          HU      IT    NL**   AT    ES        DE*        DK           BE
The price level of wages varies according to                                                     in the availability situation. The question
                                               •• If local citizens are looking for an average
location and work productivity. Therefore                                                        is to what extent the society is shattering,
                                                  new dwelling in Italy, Hungary, Poland
the indicator Affordable housing shows                                                           however, the differences in wealth are
                                                  or France, they need to save money
better the disparities in income ranges                                                          a natural part of the urban development
                                                  between 6 – 8 years.                                                                                 Affordability
in relation to house prices between all                                                          in cities.
observed countries.                            •• Second lowest affordability of own
                                                  housing was recorded in the United
However, comparing average monthly                Kingdom amounting 9.8 years.                                                                    *  bid price
salaries certifies large differences among                                                                                                        ** older dwellings
                                               •• The least affordable own housing was
selected European countries. For example
                                                  for the second time observed in the
the average monthly salary in Denmark is
                                                  Czech Republic where citizens need to
4 times higher than the salary in Hungary.
                                                  save more than 11 years to buy a new                                                            Source: National Statistical Authorities, Deloitte data calculations

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
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                7th edition, September 2018                                                                                                                                                                                                                                      Property Index |
                                                                                                                                                                                                                                                                                                  7th edition, September 2018

Comparison of Residential                                                                                                                                      Initiated Dwellings
                                                                                                                                                               In the countries of interest, the indica-
                                                                                                                                                               tor of the intensity of initiated housing
                                                                                                                                                                                                                          The lowest intensity of initiated housing
                                                                                                                                                                                                                          development was recorded in Italy and
                                                                                                                                                                                                                          Latvia. Although the total number of
                                                                                                                                                                                                                                                                             The year-on-year comparison saw the
                                                                                                                                                                                                                                                                             greatest increase in the intensity of ini-
                                                                                                                                                                                                                                                                             tiated housing development. In contrast,

Markets – Housing
                                                                                                                                                               development amounted to 3.8 initiated                      apartments initiated in Italy in 2017 was          the greatest decline in the value of this
                                                                                                                                                               apartments per 1,000 citizens in 2017.                     almost 55,000 apartments, this only                indicator was recorded in Germany. There,
                                                                                                                                                                                                                          translates to 0.9 initiated apartments per         the intensity of initiated housing develop-

Development Intensity
                                                                                                                                                               This year, the highest value of the ini-                   1,000 citizens. In Latvia, the total number        ment recorded a year-on-year decrease of
                                                                                                                                                               tiated housing development intensity                       of initiated apartments was the lowest             0.4 initiated apartments per 1,000 citizens.
                                                                                                                                                               indicator was recorded in Austria, where                   among all the compared countries (2,000);
                                                                                                                                                               8.6 apartments per 1,000 citizens were                     however, when translated to 1,000 citizens,
                                                                                                                                                               initiated. In aggregate terms, this translates             the intensity of initiated housing develop-
                                                                                                                                                               to more than 75,000 initiated apartments                   ment was as high as 1.1.
Completed Dwellings                                       per 1,000 citizens were completed in 2017.          tes to 1,500 apartments overall. In the long     in Austria. With 6.4 and 5.4 initiated
The indicator of housing development inten-               France also recorded the highest number of          term, low housing development intensity          apartments per 1,000 citizens, France and
sity at the level of the European Union coun-             completed apartments in terms of aggregate          has also been seen in Spain. There, housing      Poland placed second and third, respecti-
tries has reported similar values for several             figures: in excess of 498,000. With 4.6 and         development intensity is about one comple-       vely. In absolute terms, the greatest num-
years, reaching 3.2 completed apartments                  3.9 apartments completed per 1,000 citi-            ted apartment per 1,000 citizens.                ber of apartments were initiated in France:
per 1,000 citizens. In 2017, the same value of            zens, Poland and Belgium placed second and                                                           in excess of 429,000.
the indicator was recorded in respect of the              third, respectively.                                In the year-on-year comparison, the intensity
selected countries subject to comparison.                                                                     slightly increased in all monitored countries.
                                                          In 2017, the lowest housing development             The only exception is Belgium, which recor-
The highest housing development intensity                 intensity was recorded in Latvia, where             ded a slight year-on-year decline.
among all countries compared this year                    only 0.8 apartments were completed per
was seen in France, where 7.4 apartments                  1,000 citizens, which approximately transla-                                                         Housing Development Intensity
                                                                                                                                                               Index of the number of initiated dwellings per 1,000 citizens

                                                                                                                                                               9.0                                                                                                                                                   8.6
Housing Development Intensity
Index of the number of completed dwellings per 1,000 citizens
                                                                                                                                                   498.1       8.0
                                                                                                                                                    7.4        7.0
7.0                                                                                                                                                                                                                                                                                         206.0
                                                                                                                                                                                                                                                                                 50.4         5.4
6.0                                                                                                                                   178.5                                                                                                                         348.1
                                                                                                                                                               5.0                                                                             38.0          69.6
                                                                                                                         44.2          4.6                                                                                                                                        4.4
5.0                                                                                             20.8        62.4                                                                                                                                                      4.2
                                                                                    284.8                                                                                                                                                                    4.0
                                                                                                                                                                                                                                 31.5           3.9
                                                                                                                          3.9                                  4.0
4.0                                                      28.6                         3.4        3.6         3.6
                                                                        3.2                                                                                                                                                       3.0
                                                                                                                                                               3.0                                   11.6
3.0                                                       2.7                                                                                                                                                       3.2
                                                                                                                                                                                        2.0           2.0
            1,5           48.9                                                                                                                                 2.0        55.0
            0.8            1.0                                                                                                                                             0.9
1.0                                                                                                                                                            1.0

0.0                                                                                                                                                            0.0
             LV             ES             HU             CZ          EU 28           DE         DK          NL              BE         PL           FR                     IT           LV            DK            ES           CZ            HU           NL       DE          BE          PL           FR         AT

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

Source: National Statistical Authorities, Euromonitor International, calculated by Deloitte                                                                    Source: National Statistical Authorities, Euromonitor International, calculated by Deloitte

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Property Index Overview of European Residential Markets Affordable vs. Luxury Living 7th edition, September 2018 - Deloitte
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                7th edition, September 2018                                                                                              Property Index |
                                                                                                                                                          7th edition, September 2018

Housing Stock                                             Translated to 1,000 citizens, Poland still
In 2017, the value of the housing stock                   has the least saturated housing stock
indicator amounted to 489.4 apartments                    compared to individual countries, despite
per 1,000 citizens in terms of all European               having recorded the greatest year-on-year
Union countries. In aggregate, the number                 growth. In 2017, Poland’s housing stock
of apartments in EU countries should be                   comprised almost 14.5 million apartments,
in excess of 249.7 million, with Spain and                which translates to 376 apartments per
France having the largest housing stocks                  1,000 citizens.
in 2017. Spain tops the chart when the
housing stock is translated to 1,000 citi-
zens (549.7 apartments), while France is
number one in absolute terms (34.8 million

Housing Stock
Number of dwellings per 1,000 citizens

                                                                                                                  41.97   34.82
                                                                         2.65           4.94                      507.0
                                           7.74           4.43
500                        3.89                                                                           489.4
                                                                         461.8          465.5
                                           450.5          451.9





              PL             AT             NL             HU             DK              CZ         BE   EU 28    DE      FR      ES

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

Source: National Statistical Authorities, Euromonitor International, calculated by Deloitte

14                                                                                                                                                                                 15
Property Index |
                7th edition, September 2018                                                                                                        Property Index |
                                                                                                                                                                    7th edition, September 2018

                                               Comparison of
                                               Residential Property
                                               Prices in Selected
                                               Countries and Cities
                                               This edition of Property Index covers data    the chart below. The largest y-o-y diffe-
                                               from 14 European countries and 41 cities.     rence affecting the property value was
                                               To harmonise all outcomes, dwelling prices    recorded in the Czech Republic due to the
                                               are calculated in Euros, as such the price    termination of monetary interventions in
                                               growth or fall is influenced by a change in   April 2017. After this date the Czech crown
                                               exchange rates.                               is appreciating in the long run.

                                               Depreciation or appreciation of national
                                               currencies other than euro are shown in

                                               Euro Exchange Rate Changes, 31. 12. 2017 / 31. 12. 2016
                                               (+%) = euro appreciation, (-%) = euro depreciation against a currency











                                               -6.0%       -5.0%       -4.0%         -3.0%        -2.0%         -1.0%         0.0%           1.0%            2.0%            3.0%          4.0%

                                               Source: Yahoo Finance

16                                                                                                                                                                                           17
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                7th edition, September 2018                                                                                                                   Property Index |
                                                                                                                                                                               7th edition, September 2018

                                                                                                      2,554 EUR/sq m

Average Transaction Price
of a New Dwelling in                                                                        Netherlands**
                                                                                           2,306 EUR/sq m
Selected Countries                                                                                   7.9%

The year 2017 could be defined as a year with
stabilised growth in terms of residential prop-                                         Belgium
erty prices. The highest price per sq m was                                             2,261 EUR/sq m
                                                                    United              2.0%
observed again in the United Kingdom (4,397
EUR/sq m) even despite the price decrease                                                                                                                     Poland
                                                                    4,397 EUR/sq m
(-5.0%) compared to the last year due to                                                                                                                      1,321 EUR/sq m
British pound depreciation. However, in British                                                                                                               9.0%
pound (excluding exchange rates) house prices
increased in the UK. Such a high price shows                                                                           Germany*
a dominant and continuous position within the                                                                          3,242 EUR/sq m
European residential market.                                                                                           9.6%

                                                                                                                                             Czech Republic
Conversely Hungary was placed on the tail of
                                                                                                                                             2,162 EUR/sq m
the ranking list in terms of the average trans-
action price (1,164 EUR/sq m).

The highest price growth in 2017 was recorded
again as in the last year in Germany, where the
bid price of new dwellings rose by +9.6%. The
                                                                                                                                             2,553 EUR/sq m
transaction price was in this case not available                                                                                                                 Hungary
                                                                                     France                                                  -0,8%
for Germany. Surprisingly, the second position                                                                                                                   1,164 EUR/sq m
was occupied by Poland with a price growth of                                        4,103 EUR/sq m                                                              2.1%
+9.0%. In the Czech Republic the transaction                                         1.2%
price of new dwellings increased by 8.4%.
A relatively small y-o-y change was recorded in                                                                             2,334 EUR/sq m
Austria, France and Italy. 9 surveyed countries                                                                             -1.1%
showed in 2017 a price increase and 3 coun-
tries a price decrease.

Average Transaction Price of the New
Dwelling (EUR/sq m), 2017
Annual Change (%)

     < 0.0 %

     0.0 % – 3 %

     3.1 % – 6 %

     6.1 % – 9 % <                                 Spain
                                                   2,030 EUR/sq m
     9.1 % <

*  bid price
** older dwellings

Source: National Statistical Authorities,
Deloitte data calculations

18                                                                                                                                                                                                      19
Property Index |
                7th edition, September 2018                                                                                                                                                                                         Property Index |
                                                                                                                                                                                                                                                     7th edition, September 2018

Average Transaction Price of a New Dwelling (EUR/ sq m) and 2017/2016 change
                                                                                                                         Average Transaction                                        •• Except Hamburg all other 3 German cities
                                                                                                                                                                                       (Munich, Berlin and Frankfurt) showed
                     Vienna                     3.5%                        4,138
                                                                                                                         Price of a New Dwelling                                       significant y-o-y growth (15% on average).

 AT                  Graz                       0.8%                3,089                                                in Selected Cities                                         •• Hungary occurred as an exception among
                     Linz                       2.1%               2,901                                                                                                               CEE countries, where prices of all observed
                                                                                                                         As in previous editions, we compiled                          cities increased rapidly by 18% in average.
                     Brussels                   2.9%                3,187
                                                                                                                         a comparison of prices among the most
 BE                  Antwerp                    0.9%               2,951                                                                                                            •• Debrecen in Hungary was for the third
                                                                                                                         important European cities. Below are listed
                                                                                                                                                                                       time in a row the cheapest city among
                     Ghent                      4.9%               2,913                                                 key messages from our research.
                                                                                                                                                                                       all observed cities with a price tag of
                     Prague                     9.7%             2,587                                                   •• Inner London was again the most                            1,080 EUR/sq m. The second cheapest
 CZ                  Brno                       5.3%        2,052                                                           expensive city among surveyed cities                       city in 2017 was Győr. Average dwelling
                                                                                                                            with a price tag reaching 16,512 EUR/                      price amounted in this city 1,142 EUR/
                     Ostrava                    8.8%    1,299
                                                                                                                            sq m. Living outside of Inner London was                   sq m. If looking for a cheap living outside
                     Berlin                    13.4%                             4,935
                                                                                                                            cheaper, however, still above average                      of Hungary, Łódź in Poland with a price
                     Hamburg                    2.6%                               5,097                                    amounting to 6,841 EUR/sq m.                               of 1,186 EUR/sq m is a perfect place.
                     Munich                    15.4%                                           7,500
                                                                                                                         •• The second most expensive city
                     Frankfurt                 15.2%                                5,300                                   after London was, similarly as in the
                                                                                                                            previous year, inner Paris with a price at
                     Copenhagen                 0.3%
                                                                                                                                                                                    Munich became for the first time in our
                                                                                                                            10,697 EUR/sq m, however, with a y-o-y
 DK                  Aarhus                     1.8%                            4,586
                                                                                                                            price decrease of -13.6%. The costs of
                     Odense                     8.1%                    3,285
                                                                                                                            buying a dwelling in Marseille and Lyon                 research the third most expensive city
                     Madrid                    17.0%                      3,923                                             were in 2017 much more affordable.
 ES                  Barcelona                  5.0%                        4,208
                                                                                                                         •• Munich became for the first time in our
                                                                                                                                                                                    with an average price of 7 500 EUR/sq m,
                     Paris (inside)

                                                                                                                            research the third most expensive city
                                                                                                                            with an average price of 7,500 EUR/sq m,
                                                                                                                                                                                    surpassing other large German cities.
                                                                                                                            surpassing other large German cities.
                     Lyon                       3.8%                        4,175
                     Marseille                  2.1%                       4,010                                         •• Usually the capital is also the most
                                                                                                                            expensive city in its country. However, this
                     Ile de France              0.3%                             4,870
                                                                                                                            is not the case for some cities. Namely,
                     Budapest                  11.0%      1,643                                                             Milan, Barcelona, Hamburg, Frankfurt and
 HU                  Debrecen                  22.3%    1,080                                                               the above-mentioned Munich are more
                     Győr                      20.6%    1,142                                                               expensive than Rome, Madrid and Berlin.

                     Milan                      -0.1%                    3,609                                           •• Double digit price growth was recorded
 IT                  Rome                       -1.2%                   3,370                                               predominantly in cities located in Germany,
                                                                                                                            Netherlands, Poland and Hungary.
                     Turin                     -0.4%        1,983

 LV                  Riga                      -10.4%     1,621

                     Amsterdam                 13.6%                            4,634

 NL*                 The Hague                 17.6%             2,457

                     Rotterdam                 11.1%            2,180

                     Warsaw                     6.8%       1,847

                     Krakow                    11.1%      1,592
                     Łódź                      10.7%    1,186

                     Wrocław                    9.2%     1,515

                     Lisbon                    10.0%                3,004
                     Porto                      8.7%      1,613

                     Inner London              -0.2%                                                            16,512
                                                                                                                         %    Average Transaction Price of the New Dwelling – Annual change (%)
 UK                  Outer London              -4.3%                                        6,841

                     Birmingham                  N/A                     3,600                                                Average Transaction Price of a New Dwelling

*older dwellings
                                                                                                                         Source: Source: National Statistical Authorities, Deloitte data calculations
20                                                                                                                                                                                                                                                                            21
Property Index |
                7th edition, September 2018                                                                                                                                                         Property Index |
                                                                                                                                                                                                                     7th edition, September 2018

Comparison of the Main Cities to the Country Average (country average = 100%), 2017
                                                                                                                        The next section of Property Index focuses
                                                                                                                        on a comparison of prices of the surveyed
                                                                                                                                                                            Properties in Inner
                     Graz                                         121%
                                                                                162%                                    cities to their respective national averages:
                                                                                                                                                                            London were on
                                                                                                                        •• Properties in Inner London were on
                     Linz                                        114%                                                      average 376% of the national average and         average 376% of the
                                                                                                                           recorded therefore the largest difference.


                                                                                                                        •• In inner Paris it would cost more than
                                                                                                                                                                            national average and
                     Gent                                             129%
                                                                                                                           2.5 times as much to buy an average
                                                                                                                           apartment than in an average city in
                                                                                                                                                                            recorded therefore the
                     Brno                                 95%
                                                                  120%                                                     France.
                                                                                                                                                                            largest difference.
                                                                                                                        •• Munich, Barcelona, Amsterdam and
                     Ostrava                       60%                                                                     Copenhagen exceed the national
                                                                                                                           averages by more than double.
                     Berlin                                                  152%
                                                                                                                        •• Some cities from our survey recorded this
                     Hamburg                                                 157%
 DE                                                                                                                        year lower dwelling price than the national
                     Munich                                                                        231%                    average. Namely: Birmingham, Łódź,
                     Frankfurt                                                  163%                                       Rotterdam, Turin, Debrecen, Győr, Brno,
                                                                                                                           Ostrava and Marseille.
                     Copenhagen                                                             212%

 DK                  Aarhus                                                         180%

                     Odense                                           129%

                     Madrid                                                            193%

 ES                  Barcelona                                                              207%

                     Valencia                                  103%

                     Paris (inside)                                                                       261%

                     Lyon                                      102%
                     Marseille                             98%

                     Ile de France                                119%

                     Budapest                                            141%

 HU                  Győr                                  98%

                     Debrecen                              93%

                     Milan                                                   155%

 IT                  Rome                                                144%

                     Turin                               85%

                     Amsterdam                                                             201%

 NL*                 The Hague                                 107%

                     Rotterdam                             95%

                     Warsaw                                             140%

                     Krakow                                       121%
                     Łódź                                 90%

                     Wrocław                                     115%

                     Inner London***                                                                             376%

 UK                  Outer London                                            156%                                            Comparison of the Main Cities to the Country Average in %,
                                                                                                                             average transaction price of a new dwelling
                     Birmingham                          82%

*older dwellings                                                                                                        Source: Source: National Statistical Authorities,
                                                                                                                        Deloitte data calculations
22                                                                                                                                                                                                                                            23
Property Index |
                7th edition, September 2018                                                                                                                                                                                          Property Index |
                                                                                                                                                                                                                                                      7th edition, September 2018

Average Transaction Price of the New Dwelling                                                                                                                                           •• A moderate y-o-y decline in dwelling
                                                                                                                                          For better illustration we also dealt with
Capitals 2017/ 2016 change (%)                                                                                                                                                             prices was recorded in Inner London
                                                                                                                                          a price development of transaction prices
                                                                                                                                                                                           (-0.2%) and Rome (-1.2%).
                                                                                                                                          of the European capitals. Key results are:
Paris (inside)
                                                                                                                                                                                        •• The worst performing market was
            -13.6%                                                                                                                        •• Property prices were growing again
                                                                                                                                                                                           unexpectedly Paris with a price decrease
                                                                                                                                             on most of the markets in 2017. Out of
Riga                                                                                                                                                                                       of (-13.6%), whereby the main reason for
                                                                                                                                             the 14 capital cities where data were
                        -10.4%                                                                                                                                                             the drop is a low number of residential
                                                                                                                                             available, only 4 saw a decrease in the
Rome                                                                                                                                                                                       development projects compared to
                                                                                                                                             price compared to 2016.
                                                                                                                                                                                           last year characterised by few luxury
                                                                                                                                          •• Dwelling prices increased by 17%,             projects.
Inner London                                                                                                                                 surprisingly, in Madrid which was the
                                                                                                                                                                                        •• The second largest decline was observed
                                                             -0.2%                                                                           largest growth among all examined
                                                                                                                                                                                           in Riga (-10.4%).
                                                                                                                                          •• Double digit growth was also observed
Brussels                                                                                                                                     in Amsterdam (+13.6%), Berlin (+13.4%),
                                                                                     2.9%                                                    Budapest (+11.0%) and Lisbon (+10.0%).
Vienna                                                                                                                                       Data for Berlin confirms current dynamic
                                                                                                                                             trend in German property market during

-15.0%              -10.0%                  -5.0%                      0.0%             5.0%          10.0%            15.0%      20.0%

Source: National Statistical Authorities, Deloitte data calculations
* older dwellings

24                                                                                                                                                                                                                                                                             25
                                                              Paris (inside) – FR
                                                                                                                                                                                                                                                              Property Index |

                                                             Inner London – UK

                                                                                                                                                                                         26.4 26.3

                                          Austria (AT)
                                                               Amsterdam – NL

                           Belgium (BE)
                                                              Ile de France – FR

     Czech Republic (CZ)
                                                                                                                                                                                                                                                                              7th edition, September 2018

                                                             Outer London – UK

                                                              Copenhagen – DK

                                                                Barcelona – ES

                           France (FR)
                                                                                                                                                                                                          Average Monthly Asking Rent per sq m in EUR, 2017

     Germany (DE)
                                          Denmark (DK)
                                                                   Munich – DE

                                                                   Aarhus – DK

                                                                                                                                                            16.5 16.3
                                                                    Madrid – ES

                           Italy (IT)

     Latvia (LV)
                                                                   Warsaw – PL                                                                       14.8

                                          Hungary (HU)
                                                                      Rome – IT

                                                                   Prague – CZ

                                                                   Odense – DK

                           Poland (PL)

     Portugal (PT)
                                                                Rotterdam – NL

                                          Netherlands (NL)
                                                                      Lyon – FR
                                                                                                                                  12.3 12.2

                                                                      Milan – IT

                                                              Birmingham – UK

                                          Spain (ES)

              	United Kingdom
                                                                 Frankfurt – DE

                                                                 Marseille – FR

                                                                The Hague – NL

                                                                  Wrocław – PL

                                                                 Hamburg – DE

                                                                       Riga – LV

                                                                  Brussels – BE

                                                                Budapest – HU

                                                                    Vienna – AT

                                                                    Lisbon – PT

                                                                     Berlin – DE

                                                                  Antwerp – BE

                                                                    Ghent – BE

                                                                   Krakow – PL

                                                                      Brno – CZ

                                                                  Valencia – ES

                                                                       Linz – AT

                                                                      Graz – AT

                                                                      Łódź – PL

                                                                       Turin – IT
                                                                                                                                                                                                                                                              Property Index |

                                                                     Porto – PT

                                                                Debrecen – HU

                                                                     Győr – HU

                                                                   Ostrava – CZ

                                                                                                                                                                                                                                                                              7th edition, September 2018
Property Index |
                7th edition, September 2018                                                                                                  Property Index |
                                                                                                                                                              7th edition, September 2018

Last year we newly started to analyse,                 •• If you want to rent a dwelling in
also data from the rental market. We still                Amsterdam, you have to pay 18.4 EUR/
believe that rental housing forms a key                   sq m/month on average, which is the
and very important part of the residential                third highest value from our research.
market and therefore we would like to
                                                       •• The lowest average rent can be found
provide you with the general outcomes of
                                                          in Ostrava, where you need only
our research:
                                                          6.0 EUR/sq m/month, followed by Győr
•• A dwelling in the centre of Paris was                  (6.4 EUR/sq m/month).
   the most expensive for rent in 2017 in
   our research. The average monthly rent
   amounted 26.4 EUR/sq m.

•• It is not a surprise that the second
   highest rent could be found in Inner
   London (26.3 EUR/sq m/month). London,
   together with Paris, had the same rent
   level practically.

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

 Czech Republic                                2,938                        2,162                        1,426                        1,295

 Denmark                                       2,681                        2,554                        2,117                        2,016

 Germany                                       3,242                          N/A                       2,258                          N/A

 Italy                                     2,547                            2,334                        2,142                        1,871

 Spain                                         2,137                        2,030                        1,784                        1,655

 Poland                                        1,376                        1,321                        1,286                        1,137

 Austria                                       3,691                        2,553                       2,636                         1,724

 France                                         N/A                         4,103                       3,686                         3,764

 Belgium                                        N/A                         2,261                         N/A                         1,675

 Netherlands                                    N/A                           N/A                       2,400                        2,306

 Hungary                                       1,222                        1,164                         710                          676

 United Kingdom                                 N/A                         4,397                         N/A                         3,317

Property Index |
                7th edition, September 2018                                                                                                                                                       Property Index |
                                                                                                                                                                                                                   7th edition, September 2018

                                                                                                 Total Outstanding Residential Loans to Disposable Income of Households Ratio (in %, 2016)




                                                                                                 100                                        89.9
                                                                                                                                                   77.8   75.1

Mortgage Markets
                                                                                                  50                                                                                          38.0        35.8     32.6      28.8


in Europe
                                                                                                          NL           DK             UK     BE     ES     PT    FR      DE       AT          CZ            PL         IT     LV       HU

                                                                                                 Source: Hypostat 2017

Every year we also focus our attention on        In fact all developed countries have been in
the mortgage market. One of the most             recent years facing a low interest rate envi-
important indicators on the residential          ronment globally. National central banks
market is the indebtedness of the house-         continue with their expansionary monetary       Average Mortgage Rate (in %), 2017
holds, i.e. the proportion of the volume of      policy to keep the interest rates at a low
mortgage loans to household disposable           level. Also the residential market is heavily
income. Consequently the debt capacity           influenced and the mortgage rates are
is one of the determinants of house price        still moving on the lowest levels. However,                                                                                                                                           4.9%
growth.                                          economies have already hit bottom and we                                                                                                                                   4.6%
                                                 see a slow growth in mortgage rates.
•• The lowest level of indebtedness among
   all surveying countries could be found in     •• Portugal was the place where you could
   Hungary with 22.4% of residential debt to        get a mortgage with the most favourable
   households disposable income.                    conditions of bank financing in 2017. The
                                                    average mortgage rate fluctuated around      3%
•• Countries with a low level of the
                                                    1.0%.                                                                                                                                                        2.7%
   indebtedness proportion were Latvia,                                                                                                                                                2.3%          2.4%
   Italy, Poland, the Czech Republic and         •• The second lowest level was observed
                                                                                                 2%                                                2.0%   2.0%    2.1%     2.1%
   Austria, with total outstanding residential      in France, where it was possible to find                                         1.9%   1.9%
   loans to households disposable income            mortgage financing with a 1.5% interest                          1.5%
   under 50%.                                       rate.
                                                                                                 1%       1.0%
•• The highest level of indebtedness             •• The least affordable mortgage financing
   could be found in the Netherlands                could be found in Hungary with an
   and Denmark with residential debt to             average interest rate of 4.9%.
   household disposable income of above                                                          0%
   100%.                                                                                                  PT          FR             AT     DE     UK     CZ       IT      BE          DK            NL           ES         PL        HU

                                                                                                 Source: Deloitte data calculation
30                                                                                                                                                                                                                                            31
Property Index |
                7th edition, September 2018                                                                                                       Property Index |
                                                                                                                                                                   7th edition, September 2018

Comments on                                    Austria
                                               The Austrian residential market exhibi-
                                                                                               The residential real estate market
                                                                                                                                               Czech Republic
                                                                                                                                               The Czech residential market has been

Residential Markets
                                               ted in 2017 a record high of transaction        remained very active in 2017, with the          riding the wave of strong demand and the
                                               volume with over 10 bn EUR (approx.             number of transactions increasing 0.8%          decreasing offer of new development pro-
                                               50,000 apartments). The demand for own          compared to 2016. Housing prices across         jects and, thus, also apartments for sale.
                                               homes is still on a high level, triggered       Belgium have increased moderately year-
                                               mainly by an ongoing population growth          -on-year (+1.9%). The market is still heavily   Last year was a very dynamic one in terms
                                               especially in the urban areas (2014–2018:       supported by the historically low interest      of the development of prices of residential
                                               Vienna 7.0%, Graz 2.0%, Linz 3.4%). Ano-        rates and strong economic growth.               property. In the last quarter of 2017, the
                                               ther factor that caused the strong demand                                                       average selling prices of apartments in Pra-
                                               for apartments are the heavy investment         The market keeps showing healthy fun-           gue and regional capitals amounted to CZK
                                               activities in the residential market mainly     damentals. No oversupply is recorded            53,700 per sqm. This constitutes a year-on-
                                               driven by the still ongoing ECB’s loose         and the financial position of households        -year increase of 10.4%. During the whole
                                               monetary policy.                                remains overall robust with a debt-to-GDP       of 2017, more than 27,000 apartments were
                                                                                               ratio for Belgium that is still below the       sold in Prague and the Czech regional capi-
                                               During 2017 the upper market segment,           euro zone average. The main risks to the        tals, amounting to nearly CZK 87 billion. This
                                               specifically the high-price segment and         property market remain increasing interest      is almost 1,500 apartments (5.8%) and CZK
                                               prime locations stabilised at a histori-        rates and changes in property taxation. On      13 billion (17.7%) more than in the previous
                                               cally high price level. The demand for          the short term however, interest rates are      year. The figures demonstrate the Czech
                                               medium and lower priced dwellings, as           expected to increase only slowly and no         residential market’s continuing activity and
                                               well as properties in secondary locations       significant changes in taxation are expec-      growing price levels.
                                               increased sharply. This is mainly driven by     ted, with elections coming up.
                                               a shortage of affordable living space in the                                                    The demand and prices on the residential
                                               central areas.                                                                                  market are strongly stimulated by these
                                                                                                                                               factors: continued lack of new apartments
                                               An Austrian particularity is the high share                                                     supplied to the market, culmination of the
                                               of rentals, which for Vienna is the highest                                                     impact of the regulatory measures of the
                                               in Europe with 77%. The total Austrian ren-                                                     Czech National Bank, prolonging legislative
                                               tal apartment stock increased by approxi-                                                       process, taxation of residential housing
                                               mately 40,000 units in 2017. The average                                                        and public sentiment. Especially in major
                                               rental level exhibited a significant increase                                                   Czech cities a substantial improvement of
                                               of 3.9% p.a. over the last four years.                                                          the supply or a change in trends cannot be
                                                                                                                                               expected on the development market in the
                                               Due to the large demand in the residential                                                      coming months and years. It is expected
                                               market the construction pipeline is well                                                        that the market will slow down and prices
                                               filled, which actually leads to a substan-                                                      will grow at a more moderate rate than in
                                               tial increase of development and con-                                                           2017. Interest rates of mortgage loans will
                                               struction costs.                                                                                continue to rise and the average mortgage
                                                                                                                                               loan value will continuously grow.

32                                                                                                                                                                                          33
Property Index |
                7th edition, September 2018                                                                                                                                                                                                         Property Index |
                                                                                                                                                                                                                                                                     7th edition, September 2018

Denmark                                        France                                            Germany                                            Hungary                                        Italy                                         Latvia
In 2017, the Danish residential market         2017 was, again, a dynamic year for               The German real estate market in 2017 was          In Hungary, residential price increase         In 2017, Italian GDP registered a growth of   There has been a gradual growth in Riga
faced high growth in continuation of the       the residential market. The number of             again performing very well. The continued          slowed down to 13.8% in 2017 from last         1.5% in real terms compared to 0.9% regi-     housing market, with a rise in both prices
tendencies of previous years. This was fuel-   transactions (existing house sales) conti-        expansion in the German economy and the            year’s 15.4%. Housing prices in real terms     stered in 2016. In 2018 GDP is expected       of dwellings and costs of construction
led by steady GDP growth of 2%, primarily      nued to increase to reach 968,000 units           strong employment market in Germany are            rose by 11.4% in 2017. The housing market      to remain stable with a growth of around      (partly due to wage increases).
driven by exports, a consumer confidence       (vs. 843,000 in 2016) at the end of 2017          only two reasons for the ongoing boom.             is still characterised by strong regional      1.4%. The government deficit to GDP ratio
level that almost recovered to the pre-        (+15% compared to 2016). This dynamic                                                                heterogeneity. In 2017, the average square     decreased from 2.5% in 2016 to 2.3% in        As a result of the positive economic
-crisis level, a decrease in unemployment      is explained by multiple factors: first, the      In 2017 the residential construction in Ger-       meter prices observed in villages were         2017 and the government debt was 131.8%       growth, more accessible crediting stra-
rates from 4.2% to 4.1% and continuing low     attractiveness of the mortgage interest           many again lagged behind the sharp rise            25 per cent of the average prices recorded     at the end of 2017, down by 0.2% with         tegy from banks due to low interest rate
interest rates.                                rates and the support plan for new hou-           in the number of inhabitants. Even though          in the capital, however, the attention is      respect to the end of 2016. Household         environment and active implementation of
                                               sing, in particular the buy-to-let scheme         there was an increase in new building figu-        tending to shift to an increasing degree       expenditure and purchasing power incre-       government housing guarantee program
Transaction volume in the investment           (Pinel), and second, the reform of the inte-      res it is not sufficient. As a result the market   from the capital to rural settlements. In      ased slightly during the autumn months of     ALTUM, customers increasingly choose to
property market reached an all-time high       rest-free loan (PTZ) still running for 4 years.   situation of residential housing at the top        Budapest the number of transactions            2017.                                         obtain more expensive dwelling than they
of EUR 12bn where cities like Copenhagen,                                                        locations is still fraught.                        started to decline and while in 2015 house                                                   have been to date. This reflects the incre-
Aarhus and Odense played the biggest           Following this trend, the number of mortg-                                                           prices rose by 26.8 per cent, in 2016 and      Consumption has continued to expand in        ased demand for city centre apartments
roles followed by other Danish cities. The     age credit granted to citizens continued to       The 2017 rent for newly-built flats averages       2017 they were up 23.6 and 13.3 per cent,      line with the previous year’s performance.    and a 16% greater activity in the new
high increase in volume is approx. EUR 3bn     increase in 2017 to reach EUR 175bn (excl.        between EUR 12 and 18 per sqm and EUR              respectively.                                  The unemployment rate slightly decreased      dwellings market, compared to 2016. The
higher than the pre-crisis level of EUR 9bn.   refinancing). Despite a slight increase in        16 to 24 is demanded in the prime seg-                                                            in 2017, from 11.7% in 2016 to 11.2% in       number of started and completed dwe-
                                               borrowing rates, the increase in mortgage         ment. As in previous years, Munich is by far       The more than 5 per cent growth in house-      2017. The Bank of Italy forecasts a favou-    llings increased in 2017 as well.
These trends are expected to continue in       granted is linked to an increased purcha-         the most expensive German location. By             holds‘ disposable real income, the almost      rable economic trend also in 2018, 2019
2018, although at a slower pace, leading to    sing power and solvency of French hou-            contrast, Berlin and Cologne are the most          40 per cent rise of new housing loans, the     and 2020 with a decrease of the rate of       Also, customers increasingly choose pri-
high transaction volume, slightly decre-       seholds, driven by low mortgage interest          reasonable top locations from a German             continued decline in unemployment and          unemployment by around 0.2% per year.         vate houses built within the last five years,
asing/neutral price changes and slightly       rates. Indeed, the average acquisition costs      tenant’s perspective.                              rising savings resulting from the vigorous                                                   which they believe are more cost-efficient
increasing/neutral interest rates.             is 15% to 20% lower than in 2011–2012.                                                               wage outflow suggest that demand will          The real estate market is stable but          than apartments of more than 100 m2.
                                                                                                 Despite the intensive rent rises in recent         remain robust.                                 expected to improve during 2018 especi-       Furthermore, the average price of older
                                               Regarding the construction market, the            years, Germany (not even Munich) is not                                                           ally in the residential sector and not just   series type dwellings has grown at 7.21%
                                               upswing started in 2015 continues with            expensive compared with other large                Supply side of the housing market was          limited to the main conurbations of Rome      in 2017.
                                               498,100 building permits authorised               European cities (such as London, Zürich or         marked by further growth in 2017, appro-       and Milan. The number of transactions in
                                               in 2017, barely in line with the government’s     Dublin).                                           ximately 38,000 new construction permits       residential real estate market in 2017 was    In the short-term lease market, usually
                                               objective of 500,000 units. However, the                                                             were issued and almost 14,400 new homes        around 542,500, increasing by around 3%       2–3 bedroom rental apartments were
                                               new dwellings‘ stock is increasing slightly.                                                         were completed, which represents a 20%         compared to 2016. This figure is expected     predominantly sought by students in Riga
                                               This increase is not enough because it                                                               and 44% growth respectively. However, the      to increase further in 2018 as consumer       centre. Apartment rental fees in residential
                                               represents only 9,4 months of commercia-                                                             number of new homes relative to the stock      confidence and access to credit increase.     district were 10–30% lower than in the city
                                               lisation (11.4 months in 2016).                                                                      of dwellings is merely 0.3 per cent per                                                      centre.
                                               In a growing market context, we still note                                                           annum, which is extremely low in a regio-
                                               a lack of offer. We also note that prices are                                                        nal comparison.                                                                              As to outer Riga dwellings, majority of
                                               stable and it shows that the market has                                                                                                                                                           clients were looking for already completed
                                               reached its limits in terms of prices.                                                               Therefore, housing market fundamentals                                                       houses with a modern floor plan, which
                                                                                                                                                    imply a further upturn, but frictions on the                                                 were scarce.
                                               Pricewise, the French markets are his-                                                               supply side are hindering a healthy incre-
                                               torically driven by a major gap between                                                              ase in home construction. With respect to
                                               Paris and the regional towns. For instance,                                                          the price level, house prices may continue
                                               Marseille, Lyon and Lille show the average                                                           to rise in 2018.
                                               price per sqm circa two times lower than

34                                                                                                                                                                                                                                                                                            35
Property Index |
                7th edition, September 2018                                                                                                                                                                                                            Property Index |
                                                                                                                                                                                                                                                                        7th edition, September 2018

Netherlands                                      Poland                                                                                          Portugal                                        Spain                                              United Kingdom
In 2017 the Dutch residential market was         As expected, 2017 turned out to be another      launched to enable low income families to       Throughout 2017, the residential market         Spain was one of Europe’s locomotives              In 2017, the UK experienced another year
characterised by a large housing shortage,       record-breaking year in terms of transac-       rent flats in buildings developed and owned     remained highly dynamic. Similar to the         for economic growth during 2017 and                of rising residential prices, continuing the
especially in the densely populated areas.       tion volume on the residential market as        by governmental entities with fixed, low rent   previous year, this dynamic was most felt       forecasts place Spain as one of the leading        upward trend. The continuation in house
During the year more than 62 thousand            well as in development of new dwellings. We     rates and an option to buy ownership of the     in the city centre of Lisbon and Cascais        economies within the EU during at least            price growth has largely been attributed
dwellings were added to the housing mar-         observe continuously strong demand and          flats. The first months of the programme        Coastal zone.                                   the next three years. Despite the still high       to the availability of finance and the low
ket, the highest number since 2009. Howe-        increase in prices on residential market on     provide ambiguous picture due to lower                                                          unemployment rate (16.4%) the country              interest rate level equating to low borrowing
ver, the number of completed dwellings           the six largest markets in Poland (Warsaw,      than planned number of new developed            Tourism and, more specifically local accom-     is generating employments steadily. This           costs. Fundamentally the market has expe-
is still 20% below the pre-crisis period         Kraków, Wrocław, Poznań, Łódź and               flats, however, the long-term impact of the     modation establishments, have now an            recovery still shows weaknesses since sala-        rienced a structural change where London’s
and not sufficient to solve the shortage         Gdańsk). There were approximately 72.8k         programme on residential market remains         unprecedented impact on residential mar-        ries have decreased by 0.6% (2017 vs 2016)         house price growth has fallen behind that
on the housing market. Due to the lack of        new residential units sold in comparison        unclear and could potentially lower the         ket, since their levels represent the quality   mostly due to the creation of temporary            of the rest of the UK, where the prime cen-
sufficient developments, both property           to app. 61,600 sold in 2016 (increase by over   demand for cheaper dwellings.                   of life and value of real estate in Portugal.   and low-quality employment.                        tral London stock has been hit the hardest.
and rental prices have increased significa-      15%). Highest demand could be observed                                                                                                                                                             Demand for housing across the country
ntly over the year. The average transaction      in Q1 and Q4 2017 at levels of 18,800 and       The remarkably low interest rates existing      Additionally, the establishment of foreign      The residential market continues to evolve         persists to outstrip supply further increa-
price of residential properties increa-          18,900, respectively. Last year high demand     on the market for a long time (meaning          communities whether investors or citizens,      at two different rates. The main Spanish           sing pressure on prices.
sed with almost 10%, while the average           for dwellings was a result of continuous        cheap mortgages and unprofitable bank           who have decided to live and invest in          cities (Madrid, Barcelona, Valencia, Bilbao,
monthly rent increased at 3%. Especially         growth of Poland’s economy including a          deposits) favours demand for dwelllings         Portugal, are factors that have positively      Seville, Malaga or Alicante) as well as the
densely populated areas such as Almere,          very low unemployment rate, rising average      financed both by cash as well as mortgage.      impacted the level of external demand.          main coastal destinations are witnessing
Rotterdam and Amsterdam showed major             salary, stable and low interest rates.          In fact, despite a negative impact of new       Residential assets registered an increase of    a strong demand, significant price increases
increases.                                                                                       regulations introduced at the beginning of      almost 60,000 transactions between 2011         and a strong development activity. On the
                                                 Notably high increase of transaction prices     2016 (amended Recommendation S int-             and 2017 in Portugal, according to the Nati-    other hand, the inland areas of the country
The shortage on the Dutch residential mar-       in comparison with 2016 (9.0% for new           roducing a minimum of 20% own contri-           onal Statistics Institute.                      still show flat or even negative activity rates.
ket is also visible in the transaction volume    dwellings, 11.6% for older ones) partially      bution), the value of the newly granted                                                         In this regard, foreigners demand has been
of residential properties. In the last quarter   resulted from the rise of material and          mortgages increased in 2017 by 5.62% in         To answer to this massive international         key; Purchases made by foreigners have
of 2017, the market saw a 6% decline in          labour costs but also indicates a conside-      comparison to 2016.                             flow, luxury residential developments           grown steadily and represent about 20% of
the number of transactions compared to           rable supply shortage in the recent year.                                                       emerge in these areas and prices tend           all transactions made during 2017. Transac-
last year, which is the first decline since                                                      2017 was another exceptional year on the        to be increasingly high (median transac-        tions made by foreigners are mostly focu-
the start of the crisis. In addition, there      In addition, demand was boosted in the          Polish real estate market including residen-    tion price, old and new apartments, of          sed on the Mediterranean coastline and the
was a decrease in the number of houses           recent years by two governmental pro-           tial sector but there is still some uncer-      2,438 EUR/sq m in Q4 2017 in Lisbon city,       islands (Balearic and Canary Islands).
for sale. In Q4 2017, there were 36% fewer       grammes: ”MdM“ (“Flat for young people“)        tainty due to possible legislation changes,     an increase of 18% when compared to
residential properties for sale compared to      which financially supported people under        although no major issues in the residential     Q4 2016. In Q1 2018, luxury areas such as       During 2017, 48,900 new homes were
a year before. The decrease was strongest        35 purchasing new dwellings and ”Rodzina        market are anticipated in 2018.                 Avenida da Liberdade, reached an average        delivered to the market, notably above the
in the market for relatively small houses,       500+“ (“Family 500+“) which increased                                                           transaction price of 6,532 EUR/sq m),           34,400 homes delivered in 2016, but far
which affected first time home owners.           purchasing power of low income families.                                                        forcing the relocation of the Portuguese        from the record (and unsustainable) figures
                                                 ”MdM“ programme was closed in Q1 2018                                                           people to the surrounding areas of the city.    of 2007 (about 600,000). 2017 is therefore
                                                 and replaced with new initiative ”Mieszkanie                                                                                                    the first year of recovery in terms of the
                                                 Plus“ (“Apartment Plus“). The latter one was                                                    In order to re-establish the balance in the     number of completed dwellings since the
                                                                                                                                                 different areas of the cities, where gap pri-   start of the crisis in 2008. On the other
                                                                                                                                                 ces are huge, a rethinking of the public and    hand, Construction Permits issued for new
                                                                                                                                                 private policies to accommodate this new        dwellings have grown constantly since 2014
                                                                                                                                                 demand to the needs of the Portuguese           at a yearly 30% (CAGR 14–17). Transaction
                                                                                                                                                 population is required.                         prices grew during 2017 along the country
                                                                                                                                                                                                 but especially in Spain’s main cities and
                                                                                                                                                                                                 the coast. This has been the result of a lack
                                                                                                                                                                                                 of new product within the cities, coupled
                                                                                                                                                                                                 with a significant increase in rental prices
                                                                                                                                                                                                 leading to higher returns, together with a
                                                                                                                                                                                                 proliferation of touristic apartments in the
                                                                                                                                                                                                 city centres.

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Property Index |
                7th edition, September 2018                                                                                                                       Property Index |
                                                                                                                                                                                   7th edition, September 2018

Contacts                                                                                             Authors
                                                                                                     Residential Market
 United Kingdom                                Denmark                    Baltics states
 Chris Baldwin                                 Tinus Bang Christensen     Valters Tucs
 +44 7771 804772                               +45 30 93 44 63            +37 167 074 143            

 Paul Meulenberg
 +31 882 881 982

                                                                                                     Miroslav Linhart             Petr Hána                    Vojtěch Petrík
                                                                          Poland                     Partner                      Senior Manager               Senior Consultant
 Belgium                                                                  Maciej Krasoń              Real Estate & Construction   Real Estate & Construction   Real Estate & Construction
 Frédéric Sohet                                                           +48 225 110 360            +420 737 235 553             +420 731 638 268             +420 739 071 649
 +32 263 949 51                                                 

 Laure Silvestre-Siaz
                                                                          Czech Republic
 +33 155 612 171
                                                                          Miroslav Linhart
                                                                                                     Economic development in Europe
                                                                          +420 737 235 553

 Jorge Sousa Marrão
 +351 210 422 500
                                                                          Gabor Kohari
                                                                          +361 428 620 4
 Javier Parada
 +34 915 145 000
                                                                                                     David Marek
 Italy                                         Germany                    Austria                    Financial Advisory
 Elena Vistarini                               Michael Mueller            Alexander Hohendanner      +420 606 656 599
 +39 028 332 512 2                             +49 892 903 684 28         +43 153 700 270 0              

38                                                                                                                                                                                                          39
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