FRANKFURT, Reuters – The European Central Bank stated Tuesday that the demand for real estate in the euro area is expected to continue rising, driving up costs and increasing affordability for lower income households.

Following the COVID-19 crisis, many people saved a lot of money and looked into real estate for cash.

The ECB stated in an article published in their Economic Bulletin that “although some transactions stimulated by the pandemic might have materialised”, but the large amount of accumulated savings could still increase housing demand in the short term.

“This indicates that the demand is strong for housing but there are possible affordability issues in lower income quintiles. As expected, housing prices have grown faster than household income.

The household savings rate (the portion of disposable income left uninvested) doubled in the wake of the pandemic. It remained below 20% during the first half, well above the range of 12% to 13% recorded previously.

According to the ECB’s Consumer Expectations Survey, around 44% net-savers wanted enough to purchase a significant item, like a house or a car. The highest earning families are more likely to own property within the next twelve months.

The main drivers of property interest were the expectation that credit will be easier in the future, and the declining rates on mortgages.