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The housing market saw a marked recovery in both 2016 and 2015. The number of transactions rose by 5% in pre-owned and saw a further very sustained increase of 17% in new-build. Prices are picking up once more, although modestly, rising by 1.7% over 12 months in pre-owned in Q3 2016. However, this boom is not quite comparable to a traditional cyclical rebound, and features some weaknesses. In 2017-2018, we lean towards a scenario featuring a slight rise in 10-year OAT rates and lending rates, leading to a slowly declining trend on the market.
The housing market has been experiencing a marked rebound since early 2015. Transaction numbers grew 15% in 2015. In mid-2016, cumulative 12-month totals were again up by about 15% and are nudging the high points of the previous, 2004-2007, cycle. Prices have started rising again, even if the trend is still modest. That said, the ongoing boom is fairly atypical, with some clearly upside factors, but also some persistent weaknesses.
The level of mortgage lending rates is likely to be the driver in the housing market. Two scenarios are possible. We prefer a scenario of a very slight increase in OAT and lending rates in late 2016 and in 2017. The windfall effect could subside, therefore. But another scenario is possible, with long-term interest rates held at the same level and very low lending rates, close to those of early 2016.
The housing market bounced back in 2015. The number of home transactions reached around a million units, up by 15% over 12 months. Will this momentum persist in 2016? The recent rebound is cyclical and driven by two factors: the marked drop in lending rates and new-build stimulus plans. But the market has still not been really "cleaned up" as prices remain high. The economic environment, for its part, is mixed, so the recent recovery is fragile.
In real estate terms, 2015 was a good year. Housing sales rebounded in both the pre-owned and new-build sectors. Prices fell very little and signs of the market firming emerged at year-end. Total mortgage lending picked up, with new lending almost doubling relative to 2014. In fact, it seems to be cyclical, and linked to the level of lending rates and the new-build stimulus plan. Outlook for 2016 is more uncertain.
The housing market is picking up in 2015, with a 17% yoy increase in sales volumes in the new-build segment in the first half and a 10% yoy rise in sales over the first eight months of 2015 in the pre-owned sector. Prices are slightly declining, by around 2% yoy. Two factors explain the rebound: the support plan for new-build homes and the level of mortgage lending rates, considered close to bottoming. It nevertheless seems premature to talk about a lasting market recovery.
Signs of a market recovery have emerged in recent months. We should not overestimate them however. They mostly concern new-build housing. Sales bounced back sharply in Q1 2015, to 14% over 12 months in the developer new-build sector, and 15% for detached, non-developer homes. The pre-owned sector is more or less stable: despite a rise in sales in early 2015, there was a cumulative drop of 4% over 12 months, with house prices falling by 1.9% over 12 months in Q1.
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