Acceleration of house prices’ growth in CEE

On the radar

• Serbia’s centra bank kept the policy rate flat at 5.75%

• In Czechia, inflation rate in December arrived at 3% y/y.

• Retail sales growth in Czechia was at 4.3% y/y in November.

• At 11 AM CET Croatia will publish producer prices.

• At noon CET, Serbia will release inflation rate for December.

• In the afternoon, Poland will publish trade and current account data.

Economic developments

Growth in house prices has been accelerating since 2024. The latest data for the third quarter of 2024 show that year-on-year growth dynamics have accelerated in most of the CEE countries compared to previous quarters. The acceleration of growth dynamics is most visible in Czechia and Slovakia, where house prices declined in 2023 on average by -1.6% and -0.05%, respectively. In these two countries, house prices went up by 3.8% and 2.4% on average over the three quarters of 2024. In other CEE countries, growth in 2024 has been even more dynamic. In Croatia, Hungary, and Poland, it was even in the double-digits. Poland, with an average growth above 16% in the three quarters of 2024, is leading the ranking. Favorable regulations regarding mortgages, such as subsidies for young families, drove such dynamic growth in Poland. While Poland may be an exception, in general, we see that growth in housing prices has bottomed out in 2023 (from the decline after the post-pandemic peak), and with economic recovery, we expect growth dynamics to remain positive. Finally, from a broader perspective, over the last decade, house prices tripled in Hungary, more than doubled in Czechia, Croatia, Poland, and Slovenia, and almost doubled in Slovakia.

Market movements

Serbia’s central bank did not surprise at the beginning of 2025 and kept its key rate unchanged at 5.75%. The decision to remain on hold was expected given recent hawkish turns from the Fed, still relatively high local inflation, especially its core part, and strong domestic demand pressures, which are largely expected to continue in the mid-term. The Central bank cited global uncertainty and fragmentation as factors that can disrupt economic activity as well as the price level, urging the need for a cautious monetary approach. Nevertheless, we expect monetary easing in Serbia in the course of 2025. This week, policymakers in Poland and Romania will gather to decide on the interest rate levels. In both countries, we expect no change. Throughout last week, CEE currencies strengthened against the euro, while CEE government bond yields edged up, following increases in yields on major markets. As for other news, the Czech central bank’s profit tripled, and net income totaled CZK 155 billion, as the Czech koruna depreciated against the euro. Finally, Poland supports Trump’s call to increase defense spending, although it may take another decade to meet the proposed target of 5% of GDP.

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