Eurozone housing markets on the road to recovery
Eurozone housing markets are finally showing signs of recovery but price growth is not equal all over the subcontinent according to the European Central Bank. Their analysts describe the rising pattern as sustainable, but while prices are showing significant growth in some countries, they are falling in others.
According to the ECB’s September report, average house prices in Europe gained 1.1% in March against the previous year. Ireland is leading the trend with an increase of 16.8%. Price growth on the German and Austrian housing markets has remained steady so far, climbing by 5.0% and 3.6% respectively. Spanish real estate prices have gained 4% between March 2014 and March 2015, marking the fastest growth rate since the ‘08 financial crisis.
However, prices are falling in some EU countries like France where they lost 1.6% between March 2015 and the previous year. Prices in Greece have fallen 5.5% and 3.3% for property for sale in Italy. Nevertheless, the ECB does not expect this decline to affect the general upbeat trend.
There are two compelling reasons for the current recovery:
- Low mortgage rates and lenient credit requirements: average interest rates in the eurozone fell from 5.5% to 2.3% since the onset of the crisis.
- Higher employment and consumer confidence: unemployment dropped from 11.9% to 10.9% in July 2015 since early 2014.
Unlike the price rebound of
“It ain't necessarily so”
Not all the experts are as optimistic as the ECB. “I am sceptical of attempts to aggregate house price data because there is no such thing as a European real estate market”, said Christian Hilber, a real estate expert at the London School of Economics. According to Mr Hilbert, there are differences within domestic real estate markets that are affected by various factors.
“The pricing dynamics vary inside a country. The cost of housing has an uptrend in Barcelona and on the Costa Brava in northern Spain, and yet it is falling on the Costa Blanca in the south”, agreed Marina Filichkina, sales director at Tranio. “Generally, growth in the stable economies of Germany, Austria and UK outpaces falling house prices in Greece and Italy. Thus, the eurozone growth rate remains on average positive.”
Is the EU market prone to bubbles?
The ECB report concludes that the prices in Germany and Austria are growing too fast, leading experts to fear a potential housing market bubble burst. From 2007 to 2013, residential property prices went up by 36% in Germany and by 13% in Austria, which “may exceed their
However, some European governments are taking measures against this risk on their domestic markets. For instance, the Netherlands and Estonia set the maximum
Ivan Chepizhko, Tranio