European price boom ended in 2007

Published 08th Mar 2008

House price inflation peaked last year across Europe as interest rate rises began to bite, although mortgage lending held up in most countries despite a global credit crunch, a report showed on Wednesday.

According to the study co-sponsored by the Royal Institution of Chartered Surveyors and property services firm Savills, only Cyprus and Iceland showed a pickup in house price rises last year compared with 2006.

"2007 will probably go down in history as the year that the great European house price boom ended," said report author Michael Ball, a professor in the Department of Real Estate and Planning at Britain's University of Reading. "The year started so strongly on a wave of optimism but ended bleakly for housing markets in virtually every country," he said.

Ireland was the worst-performing market, registering a 7% fall in house prices. Also in the red was Germany, which has largely missed out on the region's housing boom, plus Greece, Estonia, and Denmark - all strong performers in 2006, according to the report.

Spain, Norway, France, and Belgium also saw a sharp year-on-year deceleration in house price rises.

The report said a more significant market decline was likely in Spain in 2008.

Poland topped the league table with a 28% rise in house prices but also faced growing challenges due to an overhang of unsold properties and a shift in foreign investor sentiment, Ball said.

He said rises in mortgage interest rates over the previous 18 months as the European Central Bank gradually tightened its monetary policy was largely to blame for the change in regional trend.

But he said fallout from the summer's US subprime crisis in the form of a credit crunch had yet to impact household lending in a significant way across the majority of Europe. The UK, Ball said, was one of few countries to experience noticeable drops in borrowing levels.

Source: ' Reuters '

View All Latest News