The The European Central Bank warned that the rapid recovery of the real estate market in the eurozone could exacerbate the housing affordability crisis, a development it described as unhealthy for the economy. This came in its report published in the “Economic Bulletin,” where it confirmed that the real estate market has regained momentum after the recent decline, and that prices are poised to rise further, which could exacerbate the burden on buyers and renters.

Real estate prices in the eurozone have been under pressure since 2022, affected by accelerating inflation, rising energy costs, and higher interest rates, leading to a cumulative price decline of 31% over a year and a half. Nevertheless, the bank noted that this decline was relatively limited compared to what markets experienced during the global financial crisis and the sovereign debt crisis, when prices fell by about 5%.

Despite monetary policy easing, real estate prices remain high, exacerbating the housing affordability crisis. The bank explained that a shortage of housing supply, coupled with continued strong fundamentals driving demand, could lead to continued price increases, which could be an unhealthy development for the economy.

The report noted that the recent decline was more geographically concentrated, with only 12 out of 20 eurozone countries experiencing price declines. Unlike previous cycles, in which the decline was concentrated in the peripheral countries of the European Union, this time Germany was the main driver of the price decline.