The Central European housing market is experiencing a remarkable surge in house prices, with growth accelerating across several countries since 2024. The Central Bank has attributed this trend to favorable regulations and subsidies, particularly in Poland, where policies supporting young families have spurred dynamic growth. However, the economic environment remains fraught with challenges, as global uncertainty and fragmentation pose potential disruptions to economic activity and price levels.
In the latest data for the third quarter of 2024, most Central and Eastern European (CEE) countries have seen an uptick in year-on-year growth dynamics compared to previous quarters. Notably, Croatia, Hungary, and Poland have reported double-digit growth in house prices. Poland stands out with an average growth rate exceeding 16% over the three quarters of 2024, leading the region in this sector.
The rise in house prices is particularly striking in Czechia and Slovakia, where a reversal of prior declines has been observed. In 2023, house prices in Czechia and Slovakia fell by -1.6% and -0.05%, respectively. However, the current data indicates a robust recovery in these markets. Over the past decade, house prices have tripled in Hungary and more than doubled in Czechia, Croatia, Poland, and Slovenia. Slovakia also saw significant gains, with prices nearly doubling within the same period.
While the housing market thrives, currency fluctuations continue to impact the broader economic landscape. The GBP/USD pair remains under selling pressure near 1.2150 during Monday's European session. Similarly, the EUR/USD trades in negative territory below 1.0250, having tested the 1.0200 mark earlier in the day. In contrast, the US Dollar maintains strength amid hawkish Federal Reserve expectations, bolstered by a strong US Non-Farm Payrolls report.
Gold prices have attracted dip-buyers on Monday, standing firm near a one-month high set on Friday. Meanwhile, the Czech koruna has depreciated against the euro, leading to a tripling of the Czech central bank's profit and resulting in a net income of CZK 155 billion.
In the realm of fiscal policy and international relations, Poland has expressed support for former President Trump's call to raise defense spending to 5% of GDP. However, officials acknowledge that achieving this target may take another decade. On the monetary front, Serbia’s central bank kept its key rate unchanged at 5.75% at the beginning of 2025, reflecting a cautious approach amidst prevailing economic conditions.