Residential markets in Southeastern Europe have recovered strongly since the start of the coronavirus pandemic (COVID-19), although prices remain the lowest in Europe, according to a report from Deloitte.
Most markets in the region experienced a dramatic slowdown in activity during the initial spring closings, but this was followed by a rebound in transactions later in the year and, in many cases, a new interest in homes and properties away from big cities.
“Overall, 2020 has turned out to be a year of growth in terms of new housing transaction prices, with national averages increasing in 21 out of 24 countries observed,” the report said. Real estate index: Overview of European residential markets 10th edition, July 2021.
Austria has become the most expensive of the countries studied, at € 4,457 per square meter, just ahead of France at € 4,421. Germany, the UK and Israel followed suit. However, the French capital Paris remained the most expensive city to buy a square meter of apartment in Europe, followed by Tel Aviv and Munich.
At the other extreme, the average transaction price for a new home was only € 578 per square meter in Bulgaria and € 881 per m² in Bosnia and Herzegovina, despite the recovery of both markets from summer 2020.
Seven other countries in the eastern part of Europe – Slovakia, Latvia, Croatia, Hungary, Poland, Serbia and Romania – also recorded average prices of between € 1,000 and € 2,000 per m² in 2020, as did Ireland and Portugal, placing them in the cheapest part of the market. The strongest price growth in 2020 was recorded in Hungary, at 12.3%.
Paris was also the most expensive market for rental properties at € 28.6 per m² per month, followed by London and Oslo. The lowest average monthly rent was in two Bulgarian Black Sea cities, Burgas at only 2.9 € per m² and Varna (3.5 € per m²). Rental rates were also low in three other Southeast European countries: Bosnia, Croatia and Serbia.
“[A]Any negative impacts that the pandemic could have on residential markets are considered to be primarily short term, ”the report said, Real estate index: Overview of European residential markets 10th edition, July 2021. He also noted the higher level of savings during the year which is now channeled into real estate purchases. “During the spring wave of the pandemic in March and April 2020, almost all non-essential workers stayed at home. This resulted in limited spending on specific types of goods and services and subsequently led to a higher volume of savings. In some countries, during closures, citizens were able to save another 20% more of their income than during regular months. “
Commenting on longer-term trends, the report added: “Due to the issues surrounding the pandemic, we … are seeing a push to modernize many European economies with the ultimate goal of long-term sustainability by making them more digital and green, which will inevitably change. how we view many aspects of the residential real estate markets.
Dynamic growth in Romania
Real estate in Romania has grown rapidly and in 2020 the number of homes delivered reached a new record, while the number of transactions increased compared to 2019, according to the report.
This follows a first pause in the residential market which was followed by a rebound in real estate transactions in the second half of the year.
“The mid-market segment of the residential market was more developed in 2020 due to the desire of buyers to live in larger spaces in the context of working from home, increasing household disposable income and low rates of employment. interest, which made housing more affordable, ”the report said.
At the same time, the drop in supply and the increase in demand in the rental segment kept pressure on rental prices; in Romania’s six largest cities, rental prices were 30% higher than in 2019 last year.
Romania also had the highest number of properties initiated in the Central and Southeastern European region last year, and the second in Europe after Austria. In Romania, there were 7.5 homes initiated per 1,000 citizens in 2020.
At the other extreme, only 2,400 housing units were completed in Bosnia in 2020, making it the country with the lowest development intensity per 1,000 inhabitants. Low numbers of dwellings were also completed in Latvia and Bulgaria.
Developments in Bosnia, which had seen low but steady growth rates in the residential market in 2018 and 2019, largely mirrored those in international markets. “At the start of the pandemic, residential real estate transactions declined dramatically due to the uncertainty introduced. Transaction volumes then increased and quickly normalized as markets mirrored the world and adapted to new conditions, remaining broadly in line with numbers expected in the last quarter of 2020, ”the report said. The report noted a “peak in demand in all segments”, both the high end and the more affordable.
On the other hand, the rental industry has been hit hard by the pandemic, with short-term visits to the country halted and long-term rentals, for example for university students, on the decline.
The Bulgarian housing market slowed considerably in 2020, after five years of steadily rising prices and strong demand supported by growing household incomes, record mortgage interest rates and a low unemployment rate. However, after the spring lockdown, “Activity picked up immediately after the measures were eased in May 2020. Buyers were rushing to buy homes before a possible second wave in the fall hit. This led to high market activity throughout the summer and fall months, offsetting lower sales volume in the second quarter, ”the report says.
As a result, the Bulgarian residential market enjoyed a successful second half of 2020, with property prices continuing to rise. Demand has shifted to previously neglected properties such as rural homes, as well as vacation apartments in ski and beach resorts. “In our opinion, this was all driven by the need to have your own space for recreation, outdoor activities and the ability to work from anywhere,” commented Deloitte.
Price increase in Serbia
The least affordable housing – measured as the number of average gross annual wages needed to purchase new standardized housing – was found in Serbia, where buyers needed an average of 15.2 gross annual wages to purchase standardized housing. Serbia was followed by the Czech Republic, where 12.2 gross annual salaries were demanded. Several other countries in central and south-eastern Europe were also among the least affordable. Properties were the most affordable in Norway, Bulgaria, Ireland, Portugal and Belgium.
Serbia entered the pandemic after steady growth in the residential market since 2016. The market contracted sharply during the state of emergency in spring 2020. However, Deloitte noted a rise in weekend house prices and recreation in rural areas by 20% on average, as Serbs sought to escape the strict measures imposed in the cities. After the foreclosure, the real estate market “rebounded rapidly in the second quarter of 2020 and continued through the first quarter of 2021”, although the report adds that buyers are still cautious and are expected to remain so until the situation is stabilizing permanently.
While Serbia saw only a slight drop in GDP in 2020, neighboring Croatia has been one of the region’s worst-hit countries by the pandemic, due to its large tourism sector. Despite this, the prices of residential real estate in Croatia continued to increase in 2020. The price per meter of new housing in the capital Zagreb increased by 7.38% during the year. Two severe earthquakes, in Zagreb in March and Petrinja in December, affected the market, contributing to the demand for new housing.
Activity in the real estate sector mainly stopped in Slovenia in the spring of 2020, but after the cancellation of the epidemic state, the number of transactions quickly returned to previous levels, while home sales increased – up around 15% over one year in July-August 2020 – while apartment sales remained stable. This was followed by a second drop in transactions in December 2020, although the drop was less pronounced for homes (20%) than for the market as a whole (35%).