EUROPE’S HOUSING MARKETS SUSTAIN GROWTH, SAYS RICS
21st February 2007
A new report from the Royal Institute of Chartered Surveyors (RICS) claims that housing markets across Europe have shown solid house-price inflation in spite of rising interest rates.
RICS’ European Housing Review 2007 found that, while growth has slowed, it is still rewarding many investors with double digit growth. It also highlighted the growth of the mortgage lending markets, with mortgage lending in eight out of the 12 euro-zone countries rising at double digit rates in 2006 (in spite of consecutive ECB rate rises of about 1.5% from 2005/6). RICS observes that the decision by lenders not to pass on the bulk of the rise to consumers may have prevented the situation in the US, where reduced affordability and higher borrowing rates have seriously impacted sales (and price rises).
RICS, which estimates that only 200,000 UK households own at least one property overseas, found that the UK was the only one of the big four to outstrip its performance in 2005 with house prises rising by 10% (with lack of supply continuing to ‘artificially inflate the market’, it said).
France, where growth has dropped to 7%, is cited as an indicator that Europe’s longest performing housing markets may be levelling out. With continued stagnation in Germany, but signs of improvement, Italy remained close to its 2005 growth (slightly down at 4%).
The best growth was seen in Scandinavian countries, with Denmark seeing growth of 22%, Norway 17% and Sweden 11%. However, Poland beat them all with price inflation above 30%. “ Poland is the star performer in terms of property price growth, followed by the other Central and Eastern European countries of the three Baltic States,” said Henry Wilkes, head of central and eastern European investment at Savills plc. “However this is expected to slow as the various markets mature. Not surprisingly, as the various Central and East European economies develop (pre and post EU accession), big increases in individual earnings and the advent of mortgage products have led to considerable pent up demand for brand new and higher quality homes. People are desperate to move from their small, dilapidated apartments in the multiple, drab, Communist concrete block buildings.”
“In the main, Europe’s housing markets had another strong year,” said the report’s author, professor Michael Ball. “The long predicted soft-landings have yet to materialise, with European Central bank interest rate rises having little effect in the Euro-zone so far.”
Milan Khatri, RICS chief economist, added: “Fears of a considerable house price slowdown in what are considered as over-heated markets of the UK, Spain and Ireland, once again proved to be quite off the mark of actual developments. Rising income and employment levels have cushioned these and other markets across Europe from rising interest rates, and the prospects for 2007 remain good as many economies have entered the year on a firm note.”
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