According to Oldypak Capital LP real estate 2022 report, house prices in Europe have not risen this fast since 2006. This increase is due to the fact that the housing market is recovering from the pandemic more quickly than other sectors of the economy. Compared to the second quarter of 2020, house prices in Europe have risen by an average of 6.9% in the second quarter of 2021.
S&P expects house prices to rise for the next four years due to insufficient supply to cover the resulting demand.
One of the main reasons for this increase is that people have accumulated a lot of savings due to the quarantine and restrictions on leaving home.

S&P estimates that in the six quarters between the first quarter of 2020 and the second quarter of 2021, households have saved around 6% of 2019 GDP in the eurozone and 9.4% in the UK.
In addition, lower borrowing costs also contributed to higher house prices as central banks loosened monetary policy in response to the pandemic. In August interest rates fell to a new record low of 1.32% on new home loans in the eurozone.
Property prices in Europe
In November 2021 the European Commission published a series of documents as part of its autumn economic forecasts, including one for the housing market. As a result, it appears that house prices in Europe are showing dynamic growth.
Indeed, house prices in the EU-27 increased by 32% between the second quarter of 2013 and the second quarter of 2021. Prices in Germany were 51.4% above the 2013 average, compared to 40.1% in Poland, 33.4% in Spain and 13.2% in France. Prices fell by 7% in Italy and remained broadly stable in Greece and Cyprus.
In Ireland, prices rose at a fast pace compared with the 27 EU countries, up 85% since 2013. Ireland was second only to Hungary, where prices rose by around 118%.
Of the total increase in property prices recorded in the EU since 2013, almost a fifth has occurred in the last 12 months alone. In the second quarter of this year, prices rose at the fastest rate since 2013, increasing by 7.3% year-on-year.
The largest increases were seen in Estonia (16.1%); Denmark (15.6%); and Luxembourg (13.6%).
Overvalued and undervalued countries in the property market
With such steep growth rates, the European Commission states that house prices are in fact overvalued in around half of the EU countries.
According to Oldypak Capital LP real estate 2022 report, Luxembourg’s housing market is the most overvalued of the 27 EU countries, with an average valuation gap of around 50%.
It is followed by Sweden, where house prices are overvalued by 28.3%; Austria (23.2%); Denmark (18.6%) and France (18.5%).
Ireland is one of the few EU countries, along with Lithuania and Romania, where property markets are considered undervalued.
Portugal: House prices will fall in the coming quarters
Since 2016, house price growth in Portugal has been very dynamic. Indeed, Portuguese property prices rose by 39% between 2016 and 2019 (based on the Eurostat house price index) on the back of good economic performance and increased foreign interest. House price growth declined from 10% in the first quarter of 2020 to around 7% in the third quarter. Covid-19 restrictions are preventing foreign potential buyers from buying property in Portugal at the same level as before, which is affecting the overall figures.
Portuguese house prices are expected to fall further in the first quarters of 2022 due to the difficult economic times ahead, but these will not be extreme lows. Compared to other European countries, Portuguese real estate remains competitive.
Belgium: forecasts on property prices
The National Bank of Belgium has calculated that Belgian houses have been overvalued. In Flanders important tax breaks have been abolished and new restrictions on mortgages have been introduced. However, despite the decline in overall economic indicators, property prices in Belgium have remained stable.
In fact, price growth has accelerated to around 5% from 4% in 2019. This can be attributed to strong government support, low mortgage rates and significant investment projects. House price growth is expected to fall to 3% and 2% in 2021 and 2022 respectively. Also, the number of unemployed people is expected to increase after the cancellation of state support programmes. Investors are predicted to be less active as it becomes increasingly difficult to achieve attractive returns. Indeed, higher house prices combined with slower income growth, making it more difficult to ask for higher rents, are having a negative impact on the level of returns from property investments.