Signs of recovery are visible in some European housing markets, especially in sales levels and prices, says the latest RICS European Housing Review launched in Brussels (2 March 2010). A significant number of European residential markets were starting to revive from spring/summer 2009 and further revival is expected in 2010. Low interest rates and reviving economies helped to avoid housing market meltdown across much of Europe.
Consequently, this looks like it is going to 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.
Some countries have experienced sharp price increases. In 2009, prices in Norway 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 worst performing markets of 2009 were Ireland, Spain, Greece, most central and eastern European countries, and especially the Baltic States where prices declined between -27% to -53% in 2009. Geographically, together they form an unlucky horseshoe around the edges of Europe.
The economies of Europe are only showing weak signs of growth and this will hold back housing markets, especially if unemployment continues to rise. 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.
Huge problems remain unfortunately. 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."