One more rate hike, and we're there

Belgium, the country that houses the capital of the European Union has seen housing prices going 10-fold and even more since the eighties of the last century. Most people are convinced over here, that real estate can never drop in value. But, boy, are they wrong.

Since the ECB started following the Federal Reserve with hiking the interest rates, sales of real estate has cooled down substantially. A cooling we haven't seen, since ... the eighties. Current interest rates for mortgages go from 3.5 to 5.5 %, depending on the downpayment and the income of the lenders. Up until now, young couples have kept buying houses, despite having to pay 300 to 600 EUR more in interest every month compared to one year ago.
This phenomenon has been going on all over Europe the last year. People are saving the food out of their mouth to buy a house. But with another rate hike by the European Central Bank, the cup will spill over. It will become impossible for young couples, the biggest market for housing in Western Europe, to loan for a house anymore.

This will create a domino effect, in which the real estate bubble of Western Europe will finally burst. Some banks will get into big trouble, as the write offs on their portfolio will be immense, and their share price will plummet.

Inflation or real estate?

Now, the ECB knows this too, the big question now is, will they choose to temper inflation even more? Or will they choose to save the real estate market?
My guess is, they will go for the latter, and no more rate hike will be done by the European Central Bank.

I better get the pop-corn!

Sincerely,

Pele23