UK real estate market particularly vulnerable to value crash, says Moody’s
The UK real estate market is one of the most vulnerable in Europe to an imminent crash in value, according to a recent note by US investment giant Moody’s.
“Markets with greater short-term fixed or variable rate borrowing, like the UK and Sweden, are at greater risk of a more sizeable correction,” the note said today.
The likelihood of a drop in European house prices has continued to rise alongside inflation and interest rates, as growth rates across the continent falter.
As mortgages become more expensive, upending a decade of historically low rates, housing demand will inevitably decline, Moody’s added.
Mortgage rates have more than doubled since the end of 2021 in the UK, as well as Germany and Portugal.
Banks in the UK are the fifth most exposed to residential mortgages, but “most banks would be able to weather the effects of a hypothetical sharp house price decline,” Moody’s continued.
Housing associations in the UK are also particularly vulnerable to falling house prices because they build homes to sell on the open market as a way of making revenue.