The residential markets of Ireland, Spain and Greece were the worst performers in 2009, alongside most central and eastern European countries and the Baltic States where prices declined between -27% to -53%. Nevertheless, signs of recovery are visible in some European housing markets, especially in sales levels and prices, according to the latest RICS European Housing Review launched in Brussels on Tuesday.
The residential markets of Ireland, Spain and Greece were the worst performers in 2009, alongside most central and eastern European countries and the Baltic States where prices declined between -27% to -53%. Nevertheless, signs of recovery are visible in some European housing markets, especially in sales levels and prices, according to the latest RICS European Housing Review launched in Brussels on Tuesday.
Some countries, in particular in Scandinavia, experienced sharp price increases in 2009. In Norway prices rose by 12%, in Finland by 8% and in Sweden by 7%. In the UK, prices rose by 1% in 2009 overall, but by 10% since their lowest point in April. In Germany, Italy, Netherlands and France, last year’s falls were relatively moderate (between -4% to -6%) and though today markets are still fragile, they are starting to stabilise and to see some price growth, the report concluded. Further revival is expected in 2010, it added.
Low interest rates and reviving economies helped to avoid housing market meltdown across much of Europe and the signs are that the downturn will be more limited than the last major one in the 1990s. However, countries with vulnerable economies will continue to experience depressed markets and falling prices. Most European house building industries, with the exception of Germany and Switzerland, are also still suffering the impact of the global financial backlash and housing supply will need some time to recover.
The report's author, Professor Michael Ball, said: 'The shallowness of the downturn in core European housing markets has surprised many commentators. But Europe is not the USA, and the problems and policy responses have been different. Mortgage defaults have only risen modestly. Low interest rates and central bank support for mortgage markets have played key roles in bringing recovery.'
Nevertheless, huge problems remain, he added. 'Housing markets around the fringe of Europe are still dragging down economies in a vicious circle and all European housing markets continue to face credit constraints and great uncertainty.'
Simon Rubinsohn, Chief Economist of RICS, commented: 'A combination of extraordinarily low interest rates and a raft of government measures have helped to put a floor under residential property markets in most European countries. A firmer tone to the macro news flow is also providing a layer of support with clear evidence that an economic recovery is now under way. Indeed, in a number of cases the boost to liquidity has pushed prices back in the direction of previous highs. However, other housing markets are continuing to labour. In particular, the overhang of supply remains a drag in Spain and Ireland.'