Nominal wages in the euro area have risen sharply over the past two years. But it hasn't risen enough to compensate for high inflation. As a result, real wages contracted every quarter from the first quarter of 2021 to the second quarter of 2023. From the second half of 2023 onwards, real wages rose slightly due to lower headline inflation, but this was not enough to offset real wages. Wage losses over the past two years. In addition to rising financing costs, this is compounding the decline in purchase prices for residential real estate.
Looking ahead, wage growth in the euro area has likely peaked and should slow down in the future. Nevertheless, nominal wage growth this year is expected to be stronger than in the past and, more importantly, stronger than inflation. As a result, real wages may rise, returning purchasing power to consumers. In Germany, real wages are likely to grow at the fastest pace since 2016, with the latest wave of strikes showing how strong wage pressures remain. Real wage growth in the Netherlands is also likely to be stronger than in previous years, despite the slowdown in nominal wages. Wage growth. In Belgium, where wages are indexed to inflation, inflation has cooled considerably, so wages will rise more slowly than in other euro zone countries.
Expected real wage increases will have a positive impact on the affordability of residential real estate, but high uncertainty and rising savings rates are likely to increase precautionary savings, so additional income is less likely to be saved more likely to be referred to. account and not necessarily a real estate investment.
