Property Index Overview of European Residential Markets
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Property Index
Overview of European
Residential Markets
Financing of Residential Real Estate Projects
4th edition, June 2015
Property Index Overview of European Residential Markets 1
Table of Contents
5 7 9 13 17
Introduction Economic Focus: Financing Comparison Comparison
Development of Residential Real of Residential of Residential Property
in Europe Estate Projects Markets Prices in Selected
Countries and Cities
Lending to Enterprises in Housing Development Average Transaction Price
Europe........................... 9 Intensity....................... 13 of a New Dwelling in
Selected Countries....... 17
Interest Premiums........ 10 Housing Stock.............. 15
Average Transaction Price
Loan-to-Value.............. 10 of a New Dwelling in
Selected Cities.............. 19
Pre-sales Requirements....11
Affordability of Own
Debt-Service Coverage Housing....................... 21
Ratio............................ 11
2
23 25 29 30 31
Mortgage Markets Annex: Comments on Highlights Contacts Authors
in Europe Residential Markets
Property Index Overview of European Residential Markets 3
Introduction
We are pleased to present to you the fourth edition of The prices in the selected countries and their major cities
Property Index, Overview of European Residential differ significantly as a result of historical development
Markets. and various factors affecting the volume of supply and
demand.
Property Index is a comparative report regarding resi-
dential markets and housing across Europe. It analyses Property Index was prepared by a proven international
factors influencing the development of residential and cross-functional team of Deloitte professionals in
markets and compares residential property prices the development, mortgage and real estate markets.
in selected (not only) European countries and cities. This publication has been prepared using data collected
by individual Deloitte offices in selected countries.
Starting this year, we have slightly changed
the structure of the report. Each year we will choose Property Index capitalises on Deloitte’s extensive
a specialised topic to focus on. This years’ issue knowledge of the real estate and development industry,
covers residential real estate financing – residential enabling us to provide you with independent and cred-
development projects. ible information.
Our goal is to provide you with European residential We hope you will find this fourth issue of the publica-
market data. How do Europeans live, and how much tion of interest for your business.
does it cost them?
As in the previous year, we especially focused our atten-
tion on:
•• Austria (AT);
•• Belgium (BE);
•• Czech Republic (CZ);
•• Denmark (DK);
•• France (FR);
•• Germany (DE);
•• Hungary (HU);
•• Ireland (IE);
•• Israel (IL);
•• Italy (IT);
•• Netherlands (NL);
•• Poland (PL);
•• Portugal (PT);
•• Russia (RU);
•• Spain (ES); and
•• United Kingdom (UK).
In addition, this year we added data regarding:
•• Sweden (SW).
Property Index Overview of European Residential Markets 5
Economic Development
in Europe
GDP growth in Europe remained relatively slow in 2014.
Real GDP Growth 2010 2011 2012 2013 2014
Low investment stands against a pick-up in demand and
Rate - Volume
growth acceleration. The fall in crude oil prices could,
however, provide a boost to economic growth. EU (28 countries) 2.1 1.7 -0.5 0 1.3
BE 2.5 1.6 0.1 0.3 1.1
Decreasing commodity and oil prices are shifting wealth
from commodity-exporting countries to commodity- CZ 2.3 2 -0.8 -0.7 2
importing ones. The falling energy prices have had
DK 1.6 1.2 -0.7 -0.5 1.1
a particularly adverse effect on Russia. In 2014,
the Russian GDP rose by 0.6%, which was the lowest GE 4.1 3.6 0.4 0.1 1.6
since 2009 financial crisis. The ruble fell 46% against
IE -0.3 2.8 -0.3 0.2 4.8
the dollar and inflation accelerated to 11.4% in
December. ES 0 -0.6 -2.1 -1.2 1.4
Strong growth in the US in 2014 has resulted in large FR 2 2.1 0.3 0.3 0.4
changes in bilateral exchange rates. Euro fell 12% IT 1.7 0.6 -2.8 -1.7 -0.4
against the dollar in 2014. However, the situation has
changed since the beginning of 2015, when the EU HU 0.8 1.8 -1.5 1.5 3.6
grew, for the first time since 2011, faster than the UK NL 1.1 1.7 -1.6 -0.7 0.9
and the US. Industrial production in the EU exceeded
analysts’ expectation more than twice in February. This AT 1.9 3.1 0.9 0.2 0.3
has had a direct effect on the euro which has started to PL 3.7 4.8 1.8 1.7 3.4
gain value against the dollar for the first time since May
2014. PT 1.9 -1.8 -4 -1.6 0.9
SW 6 2.7 -0.3 1.3 2.1
Geopolitical risks are still present and the global outlook
is clouded by the possibility of macro-economic trends UK 1.9 1.6 0.7 1.7 2.8
diverging further. Financial market volatility is also RU 4.5 4.3 3.4 1.3 0.6
a threat to the smooth recovery.
IL 5.8 4.2 3 3.2 1.8*
The recent EU economic recovery has been driven
mainly by expanding private consumption. Conversely, Source: World bank, Federal Statistics Office in Moscow
investment has weakened in 2014 and remains low. *OECD Forecast
The shifting of the fiscal policy stance of countries
to neutral has not significantly improved the growth
prospects. Inflation has dropped year-on-year in 2014,
mainly due to decreasing energy prices.
Against this backdrop, financial asset prices have
continued to rise substantially due to cheap money Europe could be facing an era of low growth, low
on the market. The yield on 10-year German Bund investment, low inflation and volatile financial markets.
decreased from 1.9% to 0.55% in 2014. Proving The European Central Bank (ECB) is attempting to battle
an increased financial market volatility, there has been this scenario and has supported the economy by starting
a bond sell-off recently resulting in an increase of bond quantitative easing early in 2015. The ECB buys EUR
yields. Investors account this to the fear of an increase in 60 billion worth of bonds each month. As of the latest
inflation resulting from growth signs in European econo- data, it seems that the financing institutions have
mies including Spain, Portugal and Ireland. Inflation is reacted positively with a decrease in credit standards.
one of the main worries of bond investors. However, This should help enterprises in growth. In this edition
what is bad for the bond markets could be good for of property index, we react to this development by
the economy. Inflation is characteristic of a healthy focusing on the financing of residential development
economy. projects in Europe.
Property Index Overview of European Residential Markets 7
Focus: Financing of Residential
Real Estate Projects
The year 2014 was a milestone for the Property Index. Lending to Enterprises in Europe
Not only that we are already publishing the fourth According to the ECB’s data, the European banks’ credit
edition but we have newly decided to add a special standards have started to ease resulting in a higher
focus to each issue. This year’s focus is financing of supply of loans. Still, despite significant improvements
residential real estate projects. since 2014, the overall level of credit standard is tight
in historical comparison. The most recent data from
Generally, finance for property development oper- Q1 2015 indicate that credit standards have fallen
ates as an interest-only, draw-down facility to finance across the board, from large corporations to small and
the development as required. Interest on a development medium-sized enterprises. The rejection rate for loan
loan is often capitalised during the development period. applications fell as well in the first quarter. The main
The capitalised interest is added to owed amount and is contributors to credit easing was decreasing cost of
repaid after the development finishes. Finally, the entire funds and smaller competitive pressures. The easing
loan inclusive of interest being charged is repaid upon of credit conditions has since the beginning of 2014
the sale of the developed units or the refinancing of any consistently resulted in overall better terms and condi-
residual debt. tions of new loans to enterprises.
When determining the financing terms, the lender
usually weighs many criteria:
•• Experience of the property developer;
•• Past payment history with the bank;
•• Financial strength of the property developer;
•• The quality of collateral;
•• Equity brought to the project by the developer;
•• The location of the proposed development;
•• The profit potential of the development;
•• Builder experience and capacity;
•• Project management team experience;
•• Type of development;
•• Level of pre-sales/pre-leases;
•• Ability to cover cost over runs;
•• Exit strategy.
As a result, the agreed terms often significantly vary
from borrower to borrower.
Property Index Overview of European Residential Markets 9Interest Premiums Typical Loan Interest Premium Applied by Banks for the Financing of Residential
We asked Deloitte real estate professionals what Development Projects
the typical interest premium over 3M Euribor is in their margin over 3M Euribor, % p.a.
country for the financing of a residential develop-
ment project with a solid business plan advanced to BE
a company with a sound reputation. The following AT
DE
summarises our research:
FR
•• The lowest interest premiums can be generally seen SW
in Belgium, Austria, Germany, France, Sweden and NL
the Netherlands due to their low risk profile and well ES
established real estate markets. IL
IT
•• Spain, Israel, Italy, Czech Republic, Poland and CZ
BE
Hungary typically have larger premiums in the range PL
AT
of 250 – 400 bps. We notice loosening credit stand- UK
DE
ards across some of the above-mentioned markets. HU
FR
A case in point is Spain where banks have, in 2014, SW IE
PT
NL
started financing real estate projects for the first time
RU
ES
since the housing crisis.
IL 0% 2% 4% 6% 8% 10%
•• A premium of 400 – 500 bps is demanded in the UK, IT
Hungary and Ireland. CZ
HU Source: Deloitte analysis
PL
NL
•• Banks in Portugal and Russia demand the highest UK
UK
premiums for residential developments. This is tied HU
FR
to the poor situation on the housing market in both IE
CZ
countries. PT
AT
RU
BE
Loan-to-Value Typical
0% Loan-to-Value 2% in the Financing
4% of Residential
6% Development
8% Projects10%
IT
Loan-to-value (“LTV”) is a financial term used by lenders
PL
to express the ratio of a loan to the value of an asset HU
PT
purchased. LTV determines the borrowing capacity. NL
DE
For example, LTV of 65% reflects a capital structure of UK
ES
FR
maximum 65% debt and 35% equity of the end value of RU
CZ
the development. The real estate developer is generally IE
AT
required to invest his equity in the project first, after DK
BE
which he is allowed to start drawing the loan.
IT 0% 10% 20% 30% 40% 50% 60% 70% 80%
PL
Generally, there seems to be no significant relationship
PT
between the perceived riskiness of a country (as meas- DE
PT
ured, for example, by its CDS-implied probability of ES
default) and its LTV. An example is Russia, where high PL
RU
levels of LTV can typically be observed, despite the prob- IE
ES
ability of default being the highest of the surveyed DK
markets. As a result, it can be concluded that LTV in BE
0% 10% 20% 30% 40% 50% 60% 70% 80%
a country is more or less dependent on conventions and FR
market pressures.
CZ Source: Deloitte analysis
•• Typical LTV is 60%-80%. PT
DE
•• The lowest LTV can be observed in Hungary and PL
the Netherlands. NL
ES
•• Banks in Russia, Ireland and Denmark usually advance HU
loans with a high LTV of 80%. BE
IT
FR
0% 10% 20% 30% 40% 50% 60%
CZ
10 DE
IT
DE
NL
CZ
HUCZ
HU
PL
NL
UK
UK
HU
FR
CZIE
PT
AT
RU
BE
IT 0% 2% 4% 6% 8% 10%
PL
HU
PT
NL
DE
UK
ES
FR
RU
CZ
IE
AT
DK
BE
Pre-sales Requirements Typical
IT 0% Pre-sales
10% Requirements
20% in the Financing
30% 40% of
50%Residential
60% 70% 80%
Pre-sales are in most cases required by the lender to Development
PL Projects
reduce risk for a property development. Being certain PT
that the developed units will be sold is essential to PT
DE
many lenders as they know that the borrower will have ES
PL
enough cash flow for the repayment of the construction RU
loan. ES
IE
DK
BE
Pre-sales vary significantly among the surveyed countries 0% 10% 20% 30% 40% 50% 60% 70% 80%
being the lowest in Portugal (10%) and the highest in FR
Italy (60%). CZ
PT
DE
Consequently, it seems that banks in the surveyed coun-
PL
tries assign different level of importance of pre-sales NL
requirements in development financing. ES
HU
BE
IT
FR
0% 10% 20% 30% 40% 50% 60%
CZ
Source: Deloitte analysis
DE
IT
DE
NL
CZ
HU
NL
IT
BE
DK
Debt-Service Coverage Ratio 0% 10% 20% 30% 40% 50% 60%
Typical
HU DSCR in the Financing of Residential Development Projects
Debt-Service Coverage Ratio (“DSCR”) is a ratio of
RU
the total net operating income of a project divided by IT
total debt payment per period. DSCR is an important AT
DE
indicator for a bank in build-to-rent projects, which PL
CZ
need sufficient cash flow to cover the debt payments. IE
NL
FR
BE
DSCR in the range of 1.1 – 1.4 is typical. The highest
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6
DSCR can be found in France and Ireland. The lowest in DK
Italy. HU
RU
AT
Europe average*
PL
Interest Rates (premium over 3M Euribor) 3.32% 8 IE 7.6
LTV 68% 7FR 6.2
6.1
6 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6
Pre-sales Requirements 39%
5
DSCR 1.26 Source: Deloitte analysis
4 3.7
*Includes data as shown in charts above. Excludes Israel and Russia. 2.9
3 2.6 2.8
2.2 2.3 2.3 2.4
28 1.9
7.6
0.9 1.0
17 0.8
0.4 6.2
6.1
06
IT* HU PT ES SW DK CZ UK IE NL DE BE PL IL FR RU AT
5
4 3.7
8 2.9
3 2.6 2.8
2.2 Index
Property 2.3 2.3 2.4 of European Residential Markets
Overview 11
7 1.9
2
6 0.9 1.0
1 0.8 5.4
0.4
5 4.5DE
CZ
NL
BE
Comparison of Residential DK
HU
RU
Markets
AT
PL
IE
FR
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6
Housing Development Intensity Housing development intensity
Completed apartments Index of the number of completed dwellings per 1,000 citizens 2013, 2014
The indicator of housing development intensity on
the European residential market has declined since 8 7.6
2011. On average, 2.4 dwellings per 1,000 citizens were 7 6.2
completed in selected European countries and almost 6.1
6
3 dwellings per 1,000 citizens were completed in all
selected countries in 2014 (including Russia and Israel). 5
4 3.7
The highest housing development intensity in 2.9
3 2.6 2.8
all selected countries in 2014 was seen in Russia 2.2 2.3 2.3 2.4
2 1.9
(7.6 completed dwellings per 1,000 citizens). This
0.9 1.0
country also recorded the highest year-on-year change, 1 0.8
0.4
while 2014 exceeded 2013 by 1.2 dwelling. Significantly
0
higher value of the indicator than in European countries IT* HU PT ES SW DK CZ UK IE NL DE BE PL IL FR RU AT
was also found in Israel (5.3).
2013 2014
Similarly to 2013, in 2014 the highest housing devel- 8
opment intensity from the European countries was * - H1 2014 data
7 Source: National Statistical Authorities, calculated by Deloitte
recorded in France (6.2) due to insufficient supply of
housing especially in the densely populated areas. Other 6
5.4
countries with above average data of selected European 5
4.3 4.5
countries include Poland, Belgium, Germany and
4
the Netherlands.
3 2.8
2.3 2.5
2.2 2.3
Housing development intensity in Ireland, the United 2
1.4
Kingdom and the Czech Republic in 2014 was near 1.0 1.1 1.3
1 0.7
the European average.
0
PT HU IE ES DK SW CZ NL UK BE IL FR AT* DE RU
The lowest intensity of housing development in 2014
was found again in Hungary (0.8 completed apartments
per 1,000 citizens) and Portugal (0.9). Portugal also
recorded the biggest year-on-year drop (decrease by
0.9 completed dwelling).
700
Newly-added Sweden reached 1.9 completed dwellings
600 565 580
per 1,000 citizens. 528
549
492 508 511
500 458 461
441 442 446 451
400 360
342
300
200
100
0
IE PL* RU UK HU NL CZ BE DK DE* FR* AT* ES PT* IT*
EUR/ RUB
EUR/ HUF
EUR/ PLN Property Index Overview of European Residential Markets 13
EUR/ CZK8 7.6
7 6.2
6.1
6
5
4 3.7
2.9
3 2.6 2.8
2.2 2.3 2.3 2.4
2 1.9
0.9 1.0
1 0.8
0.4
0
IT* HU PT ES SW DK CZ UK IE NL DE BE PL IL FR RU AT
Initiated apartments Housing development intensity
The average value of the indicator of the intensity of Index of the number of initiated dwellings per 1,000 citizens, 2013 and 2014
initiated construction in 2014 amounts, in the coun-
tries of interest, to almost 2.5 initiated apartments 8
per 1,000 citizens, which represents a year-on-year 7
decrease in this indicator by almost 9%. Data regarding
6
the European average is not available. 5.4
5 4.5
4.3
From a regional viewpoint, the highest intensity of initi- 4
ated residential development in 2014 was found again 2.8
3 2.5
in Austria (5.4 started dwellings per 1,000 citizens as of 2.2 2.3 2.3
the end of Q3 2014), France (4.5) and Israel (4.3). The 2
1.3 1.4
1.0 1.1
largest year-on-year fall of initiated construction was 1 0.7
recorded in Israel.
0
PT HU IE ES DK SW CZ NL UK BE IL FR AT* DE RU
Intensity of initiated construction in the United
Kingdom, the Netherlands and the Czech Republic in 2013 2014
2014 was near the European average. The Netherlands
also recorded the highest year-on-year growth (increase Source: National Statistical Authorities, calculated by Deloitte
*Does not include Q4 2014
by 0.8 initiated dwelling).
700
On the other hand, the lowest number of apartments 600 565 580
549
was initiated in Portugal (0.7 initiated dwellings per 508 511 528
500 492
1,000 citizens), Hungary (1) and Ireland (1.1). 442 446 451 458 461
441
400 360
342
Newly-added Sweden reached to 2.2 initiated dwellings
300
per 1,000 citizens.
200
100
0
IE PL* RU UK HU NL CZ BE DK DE* FR* AT* ES PT* IT*
EUR/ RUB
EUR/ HUF
EUR/ PLN
EUR/ CZK
EUR/ ILS
EUR/ DKK
EUR/ GBP
-20% -10% 0% 10% 20% 30% 40% 50% 60%
6,000
14 5,000
4,0008
7
6
5.4
5 4.5
4.3
4
3 2.8
2.3 2.5
2.2 2.3
2
1.3 1.4
1.0 1.1
1 0.7
0
PT HU IE ES DK SW CZ NL UK BE IL FR AT* DE RU
Housing Stock Housing stock
The average value of the housing stock in the coun- Number of dwellings per 1,000 citizens, 2014
tries of interest in 2014 reached 452 dwellings per
1,000 citizens. 700
600 565 580
549
In a comparison of selected countries, Italy reported 508 511 528
500 492
the greatest housing stock recalculated per 1,000 citi- 441 442 446 451 458 461
zens, exceeding the average of selected countries by 400
342 360
more than 28%. The second-greatest housing stock was
found in Portugal, where the percentage value exceeded 300
the country average by almost 25%. Spain, which 200
exceeded the average by more than 97 dwelling per
1,000 citizens, ranked third in 2014. 100
0
One of the lowest housing stocks per 1,000 citizens IE PL* RU UK HU NL CZ BE DK DE* FR* AT* ES PT* IT*
was found in Poland (360), Russia (441) and the United
* - 2013 data
Kingdom (442).
Source: National Statistical Authorities, calculated by Deloitte
The lowest housing stock in 2014 could be found in
Ireland (342).
EUR/ RUB
EUR/ HUF
EUR/ PLN
EUR/ CZK
EUR/ ILS
EUR/ DKK
EUR/ GBP
-20% -10% 0% 10% 20% 30% 40% 50% 60%
6,000
5,000
4,000
3,000
2,000
1,000
0
RU HU PT PL CZ ES NL** DE* DK*** BE IT AT IE SW** FR IL UK
IE
IL
UK Property Index Overview of European Residential Markets 15
DE*
ES
AT1 0.7
0
700 PT HU IE ES DK SW CZ NL UK BE IL FR AT* DE RU
600 565 580
Comparison of Residential Property
549
508 511 528
500 492
442 446 451 458 461
441
400
Prices in Selected Countries and Cities
342 360
700
300
600 565 580
200 549
508 511 528
500 492
100 442 446 451 458 461
441
400
0 342 360
IE PL* RU UK HU NL CZ BE DK DE* FR* AT* ES PT* IT*
300
In this edition of Property Index, we have newly added Euro
200 exchange rates changes, 31. 12. 2014 / 31. 12. 2013
data for Sweden. The prices and price growth are (+%) = euro appreciation, (-%) = euro depreciation against a currency
100
calculated from the point of euro investor, i.e. the price
growth is also influenced by a change in the exchange 0
EUR/ RUBIE PL* RU UK HU NL CZ BE DK DE* FR* AT* ES PT* IT*
rate. Changes in exchange rates of countries with
a national currency other than the euro are shown EUR/ HUF
in the chart on the right hand side.
EUR/ PLN
Average Transaction Price of a New Dwelling
in Selected Countries EUR/
EUR/CZK
RUB
The comparison of average transaction prices
in the surveyed countries indicates the following: EUR/
EUR/ILS
HUF
•• The highest prices per sq m can be observed in EUR/
EUR/DKK
PLN
the United Kingdom, Israel, France and Sweden. Out
of these, Israel, Ireland and the United Kingdom have EUR/
EUR/GBP
CZK
experienced a significant price growth in 2014.
-20% -10% 0% 10% 20% 30% 40% 50% 60%
EUR/ ILS
•• The cluster of post-Soviet economies falls on
the other side of the price spectrum. Russia has Source: Yahoo Finance
EUR/ DKK
the lowest dwelling prices among the surveyed coun-
tries with a price slightly below EUR 1,000 / sq m. 6,000
EUR/ GBP
•• Even despite the recent price growth, Hungary is
5,000 -20% -10% 0% 10% 20% 30% 40% 50% 60%
the only country, besides Russia, with a price mark
below EUR 1,000 / sq m. Average Transaction Price of the New Dwelling
4,000
•• The Czech Republic has the highest prices among EUR / sq m
6,000
the Post-Soviet states reaching EUR 1,200 / sq m.
3,000
However, the prices are still significantly below
Western Europe. 5,000
2,000
•• Prices in Spain and Portugal are due to their slump
4,000
in the recent years on a similar level as in the CEE
1,000
countries.
3,000
0
RU HU PT PL CZ ES NL** DE* DK*** BE IT AT IE SW** FR IL UK
2,000
1,000
IE
IL
0
UK RU HU PT PL CZ ES NL** DE* DK*** BE IT AT
IE SW** FR
IL UK
DE*
ES
2013 2014
AT
HU
NL**IE Source: National Statistical Authorities, Deloitte data calculations
DK***IL * bid price, ** older dwellings, *** all dwellings (older and new),
FR
average of apartments and houses
UK
CZ
DE*
PLES
BEAT
PT
HU
IT
NL**
RU
DK***
FR
-20% -10% 0% 10% 20% 30% 40%
CZ
PL
BE
PT
ES IT
RU Property Index Overview of European Residential Markets 17
IT
-20% -10% 0% 10% 20% 30% 40%
CZ6,000
EUR/ DKK
EUR/ GBP
5,000
-20% -10% 0% 10% 20% 30% 40% 50% 60%
4,000
3,000
6,000
2,000
5,000
1,000
4,000
0
3,000 RU HU PT PL CZ ES NL** DE* DK*** BE IT AT IE SW** FR IL UK
Prices have grown in 12 markets in 2014, compared to Average Transaction Price of a New Dwelling
only 5 in 2013. This development shows that the prop- 2014/
2,000 2013 change (%)
erty market is gaining momentum in Europe.
•• The highest price growth was recorded in Ireland, 1,000IE
IL
where new building prices rose by an astounding UK
(+31.7%). The second highest price growth was in DE*
0
Israel (+25.6%), followed by the United Kingdom with ES RU HU PT PL CZ ES NL** DE* DK*** BE IT AT IE SW** FR IL UK
AT
(+21.6%).
HU
•• Prices in Germany and Austria have continued NL**
DK***
their growth, from the last year, with (+12.7%)
FR
IE
and (+5.3%), respectively. CZIL
PL
UK
•• After a large price drop last year, Spain’s property BE
DE*
market started recovering with an increase in prices PT
ES
of (+10.5%). IT
AT
RU
HU
•• Hungary and the Netherlands have shown NL**
-20% -10% 0% 10% 20% 30% 40%
a modest recovery with a price increase of (+5.3%) DK***
and (+4.8%), respectively. FR
Source:
CZ National Statistical Authorities, Deloitte data calculations
•• Prices in Italy and Russia have continued their down- * bidPL
price, ** older dwellings, *** all dwellings (older and new),
average
BE of apartments and houses
ES
ward trend in 2014. While the Italian property prices
PT
have decreased only slightly, the Russian properties ITIT
followed the general economic contraction and RU
declined in euro terms by (-16.6%). However, this CZ
-20% -10% 0% 10% 20% 30% 40%
result is mainly influenced by ruble depreciation.
Transaction
DK*** Price as the Percentage of the Offered Price of the New Dwelling
The spread between the offered and final transac- PL
tion price serves as an important indicator indicating ES
the equilibrium between dwelling demand and supply. RU
IT
•• The highest discount was detected in Spain where HU
buyers receive on average, when buying an apartment CZ
BE
or house, a (-20%) discount. However, the discount DK***
is lower than the last year, which indicates improving
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
conditions on the housing market. PL
•• The second highest discount was in Italy (-16%) up RU
from (-10%) last year.
HU
•• Other markets show a typical discount of under IE
(-10%). RU BE
UK
ES 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
PL
IT 2013 2014
BE
Source: National Statistical Authorities, Deloitte data calculations
IE
IL *** all dwellings (older and new), average of apartments and houses
RU
CZ
UK
AT
ES
FR
PL
HU
IT
-60% -50% -40% -30% -20% -10% 0% 10% 20%
BE
IL
CZ
AT
16,000
18 FR
14,000
HU
12,000
-60% -50% -40% -30% -20% -10% 0% 10% 20%
10,000PL
ES
BE
PT
ITIT
RU
CZ
-20% -10% 0% 10% 20% 30% 40%
DK***
PL
ES
RU
IT
HU
CZ
BE
DK***
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
PL
The price of new and older dwellings often varies. Transaction Price Difference Between New and Older Dwellings
In most of the surveyed countries, prices of older RU
Discount (%) of the older dwellings with respect to new dwellings
dwellings are below the price of newly developed apart- HU
ments. However, this does not have to necessarily be IE
true in some markets for several reasons – particularly RUBE
due to the often better location of older dwellings, UK
or their historical value. ES 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
PL
•• The highest price difference between new and older
dwellings was in Hungary (-49%), with no significant IT
change from last year. BE
IEIL
•• A difference of above (-30%) was seen in France RU
CZ
and Austria.
UK
AT
•• In Israel, the difference has widened from (-15%) ESFR
to (-28%). The development was determined by PL
HU
a significant increase in the prices of newly developed IT
dwelling compared with only modest increase in -60% -50% -40% -30% -20% -10% 0% 10% 20%
BE
prices of older apartments. IL 2013 2014
•• Prices of older dwellings were higher compared to newer CZ
dwellings in Ireland, Russia and the United Kingdom. AT Source: National Statistical Authorities, Deloitte data calculations
16,000
FR
Average Transaction Price of a New Dwelling 14,000
HU
in Selected Cities 12,000
-60% -50% -40% -30% -20% -10% 0% 10% 20%
In this edition of the property index, we present 10,000
a comparison of prices among 56 major European cities. Average Transaction Price of a New Dwelling
8,000
EUR / sq m
•• Inner London was the most expensive city among 6,000
surveyed cities with a price tag reaching an aston- 4,000
16,000
ishing 14,089 EUR / sq m. Living outside Inner London
2,000
14,000
is much cheaper. In comparison, new dwellings in
Outer London cost on average 7,879 EUR / sq m. 12,0000
Tel- Aviv
Valencia
Ekaterinburg
Wrocław
Galway
Saint-Petersburg
Rome
Stockholm
Paris (inside)
Budapest
Székesfehérvár
Krakow
Katowice
Łódź
Hamburg
Linz
Turin
Inner London***
Outer London
Jerusalem
Haifa
Lisbon
Porto
Malmö
Marseille
Warsaw
Moscow
Ostrava
Munich
Frankfurt
Vienna
Barcelona
Copenhagen
Odense
Aarhus
Amsterdam
Rotterdam
Brussels
Antwerp
Ghent
Milan
Győr
Gdańsk
Poznań
Cork
Prague
Graz
Lyon
Brno
Berlin
Madrid
Den Haag
Dublin
10,000 Göteborg
•• The second most expensive city after London was
inner Paris with a price at 10,266 EUR / sq m. Again, 8,000
the cost of buying a dwelling in Marseille and Lyon is 6,000 HU PL RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
much more affordable. 4,000
•• The third most expensive city was Tel-Aviv, with 2,000
a price over 6,500 EUR / sq m, surpassing the Israeli 450%0
Tel- Aviv
Valencia
Ekaterinburg
Wrocław
Galway
Saint-Petersburg
Rome
Stockholm
Paris (inside)
Budapest
Székesfehérvár
Krakow
Katowice
Łódź
Ostrava
Hamburg
Munich
Frankfurt
Vienna
Linz
Barcelona
Copenhagen
Odense
Aarhus
Amsterdam
Rotterdam
Poznań
Moscow
Brussels
Antwerp
Ghent
Milan
Turin
Inner London***
Outer London
Jerusalem
Lisbon
Haifa
Porto
Malmö
Marseille
Győr
Warsaw
Gdańsk
Cork
Prague
Graz
Lyon
Brno
Berlin
Madrid
Den Haag
Dublin
Göteborg
capital Jerusalem. 400%
350%
•• It is often the case that the capital is the most
300%
expensive city in a country. However, this is not HU PL RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
250%
correct for some countries. Namely, Munich, Milan
200%
and the above-mentioned Tel-Aviv are more expensive 2013 2014
than Berlin, Rome, and Jerusalem. 150%
450%
100% Source: National Statistical Authorities, Deloitte data calculations
•• If you are looking for a good value, Porto might be
50% * bid price, ** older dwellings, *** all dwellings (older and new),
400%
exactly the place for you. With a price tag of only average of apartments and houses
350%
0%
860 EUR / sq m, it is the least expensive city in our
Stockholm
Ile de France
Ekaterinburg
Inner London***
Tel- Aviv
Warsaw
Krakow
Łódź
Moscow
Poznań
Linz
Lyon
Budapest
Katowice
Wrocław
Saint-Petersburg
Prague
Brno
Ostrava
Hamburg
Frankfurt
Galway
Vienna
Graz
Madrid
Barcelona
Copenhagen
Amsterdam
Rotterdam
Brussels
Antwerp
Ghent
Milan
Turin
Jerusalem
Haifa
Lisbon
Porto
Malmö
Lille
Székesfehérvár
Valencia
Győr
Cork
Aarhus
Rome
Outer London
Odense
Marseille
Paris (inside)
Gdańsk
Dublin
Berlin
Den Haag
Munich
Göteborg
300%
survey. The second least expensive city in 2014 was
250%
Székesfehérvár in Hungary. With 1,026 EUR / sq m,
200%
it is (+20%) more expensive than Porto. HU RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
150%
•• Cities in Post-Soviet countries were generally the least 100%
expensive from the survey. An exception to the rule is 50%
Moscow, which with 3,840 EUR / sq m is at a similar 0% Dublin
price level as Vienna or Milan.
Stockholm
Ile de France
Inner London***
Łódź
Ekaterinburg
Tel- Aviv
Warsaw
Krakow
Poznań
Moscow
Linz
Lyon
Budapest
Katowice
Wrocław
Saint-Petersburg
Prague
Brno
Ostrava
Hamburg
Frankfurt
Galway
Vienna
Graz
Madrid
Barcelona
Copenhagen
Amsterdam
Rotterdam
Brussels
Antwerp
Ghent
Milan
Turin
Jerusalem
Lisbon
Haifa
Porto
Malmö
Lille
Székesfehérvár
Valencia
Győr
Cork
Aarhus
Rome
Outer London
Odense
Gdańsk
Berlin
Dublin
Paris (inside)
Marseille
Den Haag
Munich
Göteborg
Inner London***
Madrid Property Index Overview of European Residential Markets 19
Jerusalem
Amsterdam
HU RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
Berlin
Cobenhaven16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Tel- Aviv
Valencia
Ekaterinburg
Wrocław
Galway
Stockholm
Saint-Petersburg
Rome
Paris (inside)
Budapest
Linz
Székesfehérvár
Krakow
Katowice
Łódź
Ostrava
Hamburg
Munich
Lisbon
Frankfurt
Vienna
Barcelona
Copenhagen
Odense
Aarhus
Amsterdam
Rotterdam
Antwerp
Haifa
Porto
Malmö
Marseille
Warsaw
Poznań
Moscow
Győr
Gdańsk
Cork
Brussels
Ghent
Milan
Turin
Inner London***
Outer London
Jerusalem
Prague
Graz
Lyon
Brno
Berlin
Madrid
Den Haag
Dublin
Göteborg
HU PL RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
In the next chart, we compare the prices of the surveyed Comparison of the Main Cities to the Country Average
cities to their respective national averages: country average = 100%, 2014
•• Property in Moscow is on average 400% of
450%
the national average. This means that it would cost
400%
four times as much to buy an average apartment in
350%
Moscow than in an average Russian city.
300%
•• Munich exceeds the national average of Germany 250%
three times. 200%
•• Hamburg, Barcelona and Paris exceed the national 150%
averages by more than two times. 100%
50%
•• There are some cases where the surveyed major cities
have prices below the national average. Namely: 0%
Stockholm
Ile de France
Ekaterinburg
Inner London***
Krakow
Łódź
Tel- Aviv
Warsaw
Poznań
Moscow
Linz
Lyon
Budapest
Katowice
Wrocław
Saint-Petersburg
Prague
Brno
Ostrava
Hamburg
Frankfurt
Galway
Vienna
Graz
Madrid
Barcelona
Copenhagen
Amsterdam
Rotterdam
Brussels
Antwerp
Ghent
Milan
Turin
Jerusalem
Haifa
Lisbon
Porto
Malmö
Lille
Székesfehérvár
Valencia
Aarhus
Győr
Cork
Rome
Outer London
Odense
Paris (inside)
Marseille
Gdańsk
Berlin
Dublin
Den Haag
Munich
Göteborg
Ostrava, Odense, Den Haag, Rotterdam, Turin, Haifa,
Malmö, Lyon, Marseille and Lille.
HU RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
The price development was recorded for the capitals of
the countries in our dataset: Source: National Statistical Authorities, Deloitte data calculations
* bid price, ** older dwellings, *** all dwellings (older and new),
•• Property prices were growing on most of the markets
average of apartments and houses
Dublin
in 2014. Out of the 15 shown cities, only 5 have seen Inner London***
a decrease in price compared to 2013. Madrid
Jerusalem
•• Double digit growth was in Copenhagen, Berlin,
Amsterdam
Amsterdam, Jerusalem, Madrid, Inner London
Average Berlin
Transaction Price of the New Dwelling - Capitals
and Dublin. Cobenhaven
2014 / 2013 Wienchange (%)
•• The best performing market in 2014 was Dublin with Budapest
astonishing growth of (+34%). Inner London came Dublin
Warsaw
second with (+32%). However, the prices in the UK Inner London***
Brussels
Madrid
Prague
were influenced by the strengthening pound. Madrid Jerusalem
Rome
was third with (+24%). Fourth place was taken by Amsterdam
Moscow
Jerusalem with (+18%). Berlin
Lisbon
Copenhagen
•• The worst performing market was Lisbon with a price Vienna -20% -10% 0% 10% 20% 30% 40%
decrease of (-14%). Budapest
Warsaw
Brussels
14 Prague
Paris
12 Rome
Moscow
10 Lisbon
-20% -10% 0% 10% 20% 30% 40%
8
Source: National Statistical Authorities, Deloitte data calculations
6 all dwellings (older and new)
***
4
2
0
BE DE* DK*** NL** ES IE PT SW** AT IT CZ PL HU FR RU UK IL
140
120
20 100
80150%
100%
50%
0% Dublin
Inner London***
Stockholm
Ile de France
Inner London***
Krakow
Łódź
Ekaterinburg
Tel- Aviv
Warsaw
Moscow
Lyon
Poznań
Linz
Budapest
Katowice
Wrocław
Saint-Petersburg
Prague
Brno
Ostrava
Hamburg
Frankfurt
Galway
Vienna
Graz
Madrid
Barcelona
Copenhagen
Amsterdam
Rotterdam
Brussels
Antwerp
Ghent
Milan
Turin
Jerusalem
Haifa
Lisbon
Porto
Malmö
Lille
Székesfehérvár
Valencia
Aarhus
Győr
Cork
Rome
Outer London
Odense
Paris (inside)
Marseille
Gdańsk
Dublin
Berlin
Den Haag
Munich
Göteborg
Madrid
Jerusalem
Amsterdam
HU RU CZ DE* IE AT ES DK*** NL** BE IT UK IL PT** SW** FR
Berlin
Cobenhaven
Wien
Budapest
Warsaw
Dublin
Brussels
Inner London***
Prague
Madrid
Rome
Jerusalem
Moscow
Amsterdam
Lisbon
Berlin
Affordability of One’s Own Housing Affordability of
Cobenhaven Own Housing
-20% -10% 0% 10% 20% 30% 40%
In order to assess the affordability of one’s own housing, Wien
Gross annual salaries for the standardized new dwelling (70 sq m), 2014
Budapest
we measure how many average gross annual salaries Warsaw
it takes to buy a standardised new dwelling (70 sq m): 14 Brussels
Prague
•• The most affordable housing can be found in 12 Rome
Belgium, where a person needs to on average save Moscow
only 3.2 years to buy a new dwelling. Belgium is 10 Lisbon
closely followed by its neighbour – Germany, and also -20% -10% 0% 10% 20% 30% 40%
Denmark. 8
•• Relatively affordable housing can be found in 6
the Netherlands, Spain, Ireland, Sweden, and Austria. 14
•• One’s own housing in Italy, the Czech Republic, 4
12
Poland, Hungary and France falls into a less affordable
2
category. Citizens of the respective countries need to 10
on average save for 6-8 years to buy a new dwelling. 0
8
•• The least affordable own housing is in Russia, BE DE* DK*** NL** ES
IE PT SW** AT
IT CZ PL HU FR RU UK IL
the United Kingdom, and Israel. 6
Source: National Statistical Authorities, Deloitte data calculations
1404 * bid price, ** older dwellings, *** all dwellings (older and new),
The affordability of one’s own housing seems to
average of apartments and houses
be correlated with the economic level of a country.
1202
Generally, the higher the GDP per capita of a country,
the more affordable housing is. 1000
BE DE* DK*** NL** ES IE PT SW** AT IT CZ PL HU FR RU UK IL
Affordability
80 of Own Housing and the Economic Level
60
140
40
120
GDP per capita in PPP (EU-27=100)
20
100
080
0 2 4 6 8 10 12
60
HU PL CZ SW** PT IT AT UK FR NL** DK***
40
BE DE* IE RU IL ES
20
10% 0
0 2 4 6 8 10 12
Number of average gross annual salaries to buy the new dwelling (70 sq m)
5%
HU PL CZ SW** PT IT AT UK FR NL** DK***
BE DE* IE RU IL ES
0%
Source: National Statistical Authorities, Eurostat, Deloitte data calculations
* bid price, ** older dwellings, *** all dwellings (older and new),
-5%
10% average of apartments and houses
-10%5%
-15%0%
-10% -8% -6% -4% -2% 0% 2% 4%
-5%
Property Index Overview of European Residential Markets 21
HU PL CZ ES IT AT UK FR NL DK BE DE
-10%0 120
BE DE* DK*** NL** ES IE PT SW** AT IT CZ PL HU FR RU UK IL
100
Mortgage Markets in Europe
14080
12060
10040
8020
60 0
0 2 4 6 8 10 12
40
HU PL CZ SW** PT IT AT UK FR NL** DK***
20
Residential lending is correlated with house prices. Relationship
BE between
DE* IEChanges
RU in
IL Dwelling
ES prices and Changes in Residential
Increase in residential lending generally supports Loans per Capita
0
an increase in dwelling prices. 0 2 4 6 8 10 12
10%
As a result, indebtedness of households (i.e. the propor-
Change in New Dwelling price 2013/ 2012
HU PL CZ SW** PT IT AT UK FR NL** DK***
tion of residential debt to household disposable income)
and consequently their debt capacity is one of the deter- 5% BE DE* IE RU IL ES
minants of house price growth.
•• The lowest level of indebtedness of households can 0%
10%
be found in Russia with 6.5% of residential debt to
household disposable income. -5%
5%
•• Countries with a low level of indebtedness are
the Czech Republic, Hungary, Poland, Italy, Israel and
-10%
Austria, with residential debt to household disposable 0%
income of under 50%. Consequently, these countries
have the highest potential of house price increase -15%
-5% -10% -8% -6% -4% -2% 0% 2% 4%
as a result of overall better financing conditions and
following increases in mortgage lending. Change in Residential Loans per Capita 2013/ 2012
-10%
•• The highest level of indebtedness can be found in
HU PL CZ ES IT AT UK FR NL DK BE DE
Sweden, Denmark and the Netherlands with residen-
tial debt to household disposable income of above -15%
150%. -10%Source: European
-8% Mortgage
-6% Federation,
-4%Deloitte data
-2%calculations
0% 2% 4%
250
HU PL CZ ES IT AT UK FR NL DK BE DE
Residential
200 Debt to Household Disposable Income
%, 2013*
150
250
100
200
50
150
0
100 RU CZ HU PL IT IL AT FR DE BE PT ES IE UK SW DK NL
50
0
RU CZ HU PL IT IL AT FR DE BE PT ES IE UK SW DK NL
Source: European Mortgage Federation, Bank of Israel, Euromonitor International
*Data for 2014 is not yet available
Property Index Overview of European Residential Markets 23Annex: Comments
on Residential Markets
Austria Czech Republic
Residential property prices have increased in 2014. Volume of housing development has increased by 10%
Further increase of housing prices can be expected in compared to last year. Construction demand overall
the short-run. Contributing factors behind the price has picked-up. This is a positive factor for construc-
increases since the end of 2007 have been the contin- tion companies, some of which now have turned into
uing immigration, investors’ flight into real assets black numbers after a long period of weak demand in
(as they are perceived as “safe haven”), expected low the post-crisis period.
or even negative return of alternative investments,
low credit interest rates and expectations of further The increasing housing supply has been met by
price increases. In 2014 there has been an increase in increased demand. The growth in demand was mainly
transactions compared to the 2013 figures, which is influenced by decreasing costs of mortgage financing
attributable to the cutback of the price increase as well thanks to high competition between finance providers
as the upcoming tax reform. Diminishing loan growth and improvement in economic sentiment.
and declining household indebtedness suggest that
a high percentage of equity financing is being used in Prices on the Czech property market have continued
property investments. in their gradual recovery in 2014. The house prices in
Prague have finally reached their pre-crisis levels. Prices
Belgium in the rest of the country are still ca. 16% below their
The Belgian housing market has an excellent track peaks.
record over the last years, as demonstrated by
the nominal price growth of 15% between 2008 and It is expected that year 2015 could see accelerating
2014, despite the financial crisis. Residential property house prices thanks increasing housing demand.
prices rose by approximately 0.5% in 2014, and we A threat to this scenario is an increase of mortgage rates
expect this moderate increase - in line with inflation - to by banks that have, due to their competition, started
continue in the near future. offering mortgage products at the edge of profitability.
Prices developed differently in Belgium’s three largest Denmark
cities. While new dwelling prices in Antwerp rose by During 2014 both prices and turnover of residential
2.9%, prices in Brussels (-0.4%) and Ghent (-1.50%) property in Denmark increased.
declined in 2014.
As in 2013, there are significant regional differences in
The risk of a major price correction seems limited, with the price development of residential property. Especially
the Belgian residential property market showing healthy the residential property market in Copenhagen has
fundamentals. No oversupply or excessive debt accu- experienced increasing prices and turnover, while
mulation by households have been observed. The main the rural areas of Denmark experienced stagnant or
risks for the property market are increasing interest rates slightly increasing property prices. However, there are
and changes in property taxation. While an increase in indications of increasing prices and turnover in the rural
interest rates seems unlikely in the short term, changes areas of Denmark as well.
in property taxation are more unpredictable. The Flemish
Government decided to reduce the fiscal advantage of
the house bonus as from 2015, which caused a rush on
real estate in Flanders by the end of 2014.
Stricter regulation regarding sustainability and
the minimum requirements for dwellings could increase
the price gap between older dwellings and new
developments.
Property Index Overview of European Residential Markets 25France Hungary
In 2014, the trends for the French residential market After the last few years of struggling, the housing
are quite different between new and older dwellings. market has all the ingredients that can boost
The number of sales of older dwellings is still fairly high the housing market – low housing prices, cheap credit
(around 700,000) and prices have fallen a little. But and improved economic outlook. The enhanced activity
the sector of new dwellings is characterised by a marked of the residential developers is perceivable. Frozen
fall-off in sales and started dwellings. However, prices projects have been started again, and new develop-
remain high. In 2014, the total started dwellings have ment activities are detectable. The completed number
dropped by 11%, reaching 298,000 units. This repre- of dwelling units was 8,358 in 2014, which was 13%
sents a sharp decline of -36% in started dwellings since higher than the 2013 data; however this amount is still
the 2007 peak of 466,000. around the historical minimums. As the key factors indi-
cate, 2014 was the turning point in the residential prices
A rising unemployment rate, increasing housing costs and development volumes.
and tax uncertainties have weakened demand in 2014,
as in 2013. These negative factors are partially offset by Israel
low mortgage interest rates and healthy market funda- Property prices in Israel are currently about 25% above
mentals – favorable demographic, households tending their equilibrium value, owing largely to low mortgage
to split, a strong desire to become owners. interest rates and supply shortage.
In Paris, the number of transactions in older dwell- Italy
ings had slightly increased (+ 2%) from 2013 to 2014. During the first three quarters of 2014 the Italian
However, with 28 660 sales registered in 2014, the level Real Estate market reversed the negative trend of
of activity remains low. In Q4 2014, the prices ranged residential transactions by achieving an increase of
from EUR 5,690 (19th arrondissement) per sq m to EUR 2.2%. The growth in residential transactions has been
13,970 (6th) and the average transaction price of older particularly strong in the main metropolitan areas and
dwellings dropped below EUR 8,000 / sq m with EUR the expectations that this will have a positive influence
7,960 for this last quarter. for the residential markets in the peripheral areas. In
the first semester of 2014, the percentage of acquisi-
Germany tions made with the use of mortgage financing reached
In 2014, the German residential real estate market once around 63% with a loan to value ratio (LTV) reaching
again featured strong dynamics in terms of transaction 62%, an increase of 11% with respect to the same
volume. The transaction volume for residential/ portfolio period in 2013.
deals reached EUR 12.8 bn at the end of the year.
Although, it was around 16 % lower than last year, Despite the relatively slow recovery in GDP, continued
it was still the second-best result in the last seven years. difficulties with reductions in disposable income of
The high transaction activity was fuelled by historically around 1.2% and a stubbornly high unemployment rate
low interest rates, healthy fundamental data, and very of nearly 13%, the general level of consumer confidence
low vacancy rates in major and university cities, which that returned in 2014 is expected to stabilise if not
led to further strengthening of property investors’ increase through 2015.
interest in the German Housing market. Housing compa-
nies were using the favourable conditions to strategically The resistance to the re-pricing of real estate assets is
adapt their housing stocks. likely to continue in 2015 as the increase in transaction
volumes recorded are likely to reinforce the expecta-
In general, the residential market showed stabilising tions in the minds of sellers that a sustained recovery is
prices for dwellings. In major cities, however, prices for underway.
dwellings rose significantly due to increasing numbers
of people moving into the cities, due to the fact that
the number of new developments could not keep up
with increased demand, and due to the favourable
climate for buying homes. Rents generally increased at
a slower rate compared to last year.
26Ireland Poland
A number of recent surveys have indicated that there Housing sales results in 2014 were at record highs since
was a marked improvement in the Irish residential 2008, mainly due to stable prices, low interest rates,
property transactions in 2014, when compared to moderate optimism of buyers and introducing good
2013. Increased consumer sentiment and increased quality products on the markets by the developers. Also
levels of mortgage lending have led to this improve- the mobilisation of buyers (who wanted to take a loan
ment. Published data on the sector have suggested that for an amount exceeding 90% of the purchase price
there was an average price increase of all dwellings before the requirements changed in January 2015) and
nationally by 14% and 19% in the Dublin region. Whilst the governmental programme supporting the purchase
these increases are significant, property prices are still of private apartments had an impact on sales volume
well below the averages at the height of the property in 2014.
boom in 2007. In the wake of the global financial crisis,
the sector continues to face a number of challenges The total 2014 mortgages sale number was 1% lower
and the lack of supply in the market is becoming a big than in 2013, and analysts expect this trend to continue
issue. This is attributable to a number of reasons such (due to, among other things, an increase in the required
as limited finance, a low number of still active devel- level of personal financial contributions in total loan
opers, price levels in some areas still being at a level value from 1 January 2015). The minimal 10% down-
that will not generate a return and the National Asset payment, will impede some customers from taking out
Management Agency (NAMA) effectively controlling mortgages. On the other hand, low interest rates will
the development of large land banks. encourage them. As a result, mortgage sales in 2015
should remain at a similar or slightly lower level than in
Netherlands 2014. Slight fluctuations in residential properties prices
The Dutch housing market showed some signs of may occur at the beginning of the year.
recovery. In 2014, real house prices were bottoming
out after a sharp decrease of 8% in 2013. At the end of Additionally, government introduces a new initia-
2014, house prices are 27% below their pre-crisis (2008) tive - “Flat for rent” (from 2015). The “Flat for
levels. The number of sales in the Dutch housing market rent” programme intends to increase the supply of
significantly increased by 30% where the average time flats for rent at affordable rates. It is expected that
of sale shortened by 20%, compared to 2013. the programme will last for the next several years.
The first tenants have already moved to a building
In 2014, the number of new developments decreased participating in the programme (located in Poznan).
by 10% compared to previous year. As a result,
the transaction volume of new dwellings covers only There is an observable trend among developers of
0.5% of the total housing stock. However, the addi- the new scheme constructions such as apartments
tion of housing supply is likely to increase as a result of for rent, flats in condo system and private student
a growing number of building permits in 2014. dormitories.
Due to economic growth, an improving market senti- Portugal
ment and the historically low mortgage interest rates, After a tough period (about six years) in the real estate
the outlook for the Dutch residential real estate market sector, houses are starting to be sold for higher prices,
is positive. after a steep decline in prices since 2007, which
reached 20.3%.
Property Index Overview of European Residential Markets 27Russia United Kingdom
Despite political tensions with the West, economic sanc- A lack of available stock combined with tighter restric-
tions and drop in oil prices, 2014 was a record high year tions on mortgage lending contributed to a slowdown
in terms of housing development intensity, volume of in activity in the UK housing market 2014. The market
mortgages issued and number of transactions. Demand received a boost towards the end of the year, when
was at its peak in second half of the year, when buyers a change to Stamp Duty tax rates had the effect of
were seeking to get rid of the depreciating rouble. providing the majority of buyers with more purchasing
However, the outlook for 2015 is much more pessi- power, however this is only predicted to provide a short-
mistic. A further decline of euro-denominated prices term stimulus to the market. Tightened lending criteria
and a slowdown in housing market activity is expected have hampered growth in mortgage approvals over
as the Russian economy slides into recession. the course of the year, but buyers who can provide
an adequate deposit are benefitting from historically
Spain low interest rates, as a result of the low Bank of England
The Spanish residential market has started to show base rate.
signs of recovery. The recovery of the sector will be
very gradual, still conditioned by the high rates of Construction of new stock continues to lag and has
unemployment, the decrease of the resident popula- not been helped by high construction cost inflation
tion and the oversized housing stock. However, signs of and shortages of both labour and materials. The level
stabilisation are beginning to be tangible: the demand of residential construction is a key point of debate in
for housing is growing with respect to 2013, the price the upcoming general election, which in itself is gener-
decrease has slowed significantly and the economic ating uncertainty in the housing market and is noted in
environment will continue to improve over the next surveys as a key concern amongst buyers.
years.
Sweden
The prices at the national level for all types of housing
has increased during 2014. Condos and houses have
increased by 9%, while holiday cottages have increased
by 5%. At the end of the year, the price increase slowed
down a bit.
28Highlights •• The lowest interest premiums advanced by banks for the financing of residential development projects can be generally seen in Belgium, Austria, Germany, France, Sweden and Netherlands due to their low risk profile and well established real estate markets. •• Pre-sales vary significantly among the surveyed countries being the lowest in Portugal (10%) and the highest in Italy (60%). •• Debt-service coverage ratio (DSCR) in the range of 1.1 – 1.4 is typical. The highest DSCR can be found in France and the lowest in Italy. •• Average interest rate premium of the surveyed countries, which repre- sent the majority of Europe, is 3.32%; average loan-to-value is 68%, average pre-sales requirements are 39%, and average DSCR is 1.27. •• Similarly to 2013, in 2014 the highest housing development intensity from the European countries was recorded in France (6.2). Other coun- tries above the average of selected European countries include Poland, Belgium, Germany and the Netherlands •• From a regional viewpoint, the highest intensity of initiated residential development in 2014 was found again in Austria (5.4 started dwellings per 1,000 citizens as of the end of Q3 2014), France (4.5) and Israel (4.3). •• The highest prices per sq m can be observed in the United Kingdom, Israel, France and Sweden. Out of these, Israel, Ireland and the United Kingdom have experienced a significant price growth in 2014. •• The highest price growth was recorded in Ireland, where new building prices rose by an astounding (+31.7%). The second highest price growth was in Israel (+25.6%), followed by the United Kingdom with (+21.6%). •• Inner London was the most expensive city among surveyed cities with a price tag reaching an astonishing 14,089 EUR / sq m. Living outside Inner London is much cheaper. In comparison, new dwellings in Outer London cost on average 7,879 EUR / sq m. The second most expensive city after London was inner Paris, with a price at 10,266 EUR / sq m. •• If you are looking for good value, Porto might be exactly the place for you. With a price tag of only 860 EUR / sq m, it is the least expensive city in our survey.
Germany Hungary
Contacts
Belgium Poland
Denmark United Kingdom
Italy Austria
United Kingdom
Andrew Rothery Spain Netherlands
Paul Meulenberg
Netherlands
EMEA
Javier Parada
arothery@deloitte.co.uk pmeulenberg@deloitte.nl japarada@deloitte.es
+44 207 007 1847 +31 8 828 819 82
Russia
+34 915 145 000
Ireland Sweden
Padraic Whelan Henrik Kaarme
pwhelan@deloitte.ie hkaarme@deloitte.se
+35 314 172 848 +46 75 246 20 02
Belgium Denmark
Frédéric Sohet Lars Kronow
FSohet@deloitte.com lkronow@deloitte.dk
+ 32 2 639 49 51 +45 2 220 27 86
France Central Europe
Laure Silvestre-Siaz Czech Republic, Poland, Hungary
lsilvestresiaz@deloitte.fr Diana Radl Rogerova
+33 1 556 121 71 drogerova@deloittece.com
+420 246 042 572
Portugal Germany
Jorge Sousa Marrao Michael Mueller
jmarrao@deloitte.pt mmueller@deloitte.de
+35 121 042 25 03 +49 89 290 368 428
Spain Italy Austria
Javier Parada Elena Vistarini Alexander Hohendanner
japarada@deloitte.es evistarini@deloitte.it ahohendanner@deloitte.at
+34 915 145 000 +39 02 833 251 22 +43 1 537 002 700
Russia
Tim Copeland
timcopeland@deloitte.ru
+74 957 870 600
Israel
Doron Gibor
dgibor@deloitte.co.il
+97 237 181 819
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