In a new report ‘COVID-19 driven housing trends will exacerbate wealth inequalities among young and low-income populations in Europe’ the international ratings agency Moody’s warns that “housing affordability will decline despite falling house prices” and that the “economic downturn triggered by COVID-19 will depress European house prices, particularly in tourism-dependent [like Spain] countries and the UK.”
The Coronavirus crisis “will speed up fundamental shifts in the European housing market, with affordability to decline despite falling house prices, greater demand for social housing and rental market regulation, alongside a shift in housing preferences away from urban areas to smaller cities and suburbs.”
Most depressing of all, “housing affordability will particularly worsen for young and low-income population groups after COVID-19, because of reduced earnings and access to finance, exacerbating wealth inequalities.” That suggests that politics and populism will get worse.
Moody’s forecast we will see a rise in demand for social housing coupled with political pressure for more intrusive rental market regulation “as income losses and unemployment rise amid the current economic downturn.”
This will be a big problem in Spain, where social housing hardly exists, and the government is already using regulations to dump the cost of social housing provision onto the private sector without compensation, as discussed here.
Moody’s forecast that house prices will rise by 2.5% in Spain this year, before starting to fall in 2021, though only by 2% they say, in a similar pattern to other EU countries. Prices are expected to fall the most in the UK. This is difficult to believe, but that’s what they say.
With its lack of social housing, and high housing costs relative to income, Spain will struggle more than most other European countries to deal with the housing crisis that is likely to come with the economic crisis next year. How will the government respond? Probably by dumping the cost of social housing provision on the private sector without compensation, as it has done so far. A rise in homelessness will also lead to more people sleeping on the streets.