House price rises put UK in Europe's top five

Published 04th Mar 2010

UK housing market outperformed much of Europe in 2009, while Baltic states saw prices plummet by 50%, according to latest RICS housing report


The UK was one of just five European countries that saw house prices rise last year, while property values in Latvia plummeted by more than 50%.

These are among the key findings of a study published today which suggests signs of recovery are already visible in some of Europe's housing markets – including Britain's – following the damage wreaked by the global financial crisis.

The latest European housing review by the Royal Institution of Chartered Surveyors (RICS) said there was evidence of fragile recovery across much of Europe, with low interest rates and reviving economies helping to stave off "market meltdown".

However several countries' property markets were still in deep trouble, the report's author, Professor Michael Ball, said.

That certainly applies to Latvia, where prices plunged 53% last year following a near-30% fall in 2008. The two other Baltic states, Estonia and Lithuania, saw property values fall by 30% and 27% respectively last year. All three have been particularly badly hit by the global crisis.

Latvia's property market in particular has been on a rollercoaster: in late 2006, its capital, Riga, topped a global house price league table issued by the estate agency Knight Frank, with property values down 39% in a year.

By contrast, Scandinavian homeowners enjoyed some property price growth last year. Norway topped the table with values up almost 12% last year, followed by Finland (8%) and Sweden (7%). The latter is expected to see continued buoyancy as a result of attractive borrowing costs and temporary tax breaks.

Britain came fifth, according to RICS, with prices rising by 1% in 2009 overall, and by 10% from their low point in April.

Ball said it seemed unlikely that UK prices would dip again, and added: "Recovery will continue to be slow, particularly outside of London and the south-east."

Spain's difficult economic conditions intensified the continued downward path of the country's housing market, the report said, with prices falling around 10%. "The level of supply overhang in Spain, Cyprus and Ireland, including both unsold holiday homes and primary residences, could bring these markets further problems," the report said.

In Germany, Italy, the Netherlands and France, last year's falls were relatively small (ranging from 4% in Germany to 6% in the Netherlands). "Though today markets are still fragile, they are starting to stabilise and to see some price growth," Ball said.

He predicted countries with vulnerable economies would continue to experience depressed markets and falling prices. Other poor-performing markets included Ireland, where property values fell almost 20% last year, and Greece, where they fell around 6%.

"The shallowness of the downturn in core European housing markets has surprised many commentators," Ball said. "But Europe is not the US, 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."

He added: "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."

Source: ' Guardian '

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