European Real Estate Undergoes Fragile Recovery
Thursday, March 03, 2011

Recovery is underway in the majority of European housing markets, but uncertainty remains in the region, with considerable performance variations, according to the Royal Institute of Chartered Surveyors (RICS) European Housing Review.

The study finds that while housing markets were experiencing rising prices in Belgium, France, Germany and the Nordic countries during 2010, other markets were still facing problems. Ireland, Hungary and Cyprus experienced significant falls through the year and in the UK, Netherlands, Poland and Italy prices were slightly down.

On the other hand, in Spain, Greece and Portugal last year’s falls were quite moderate despite their economic problems, and the Baltic States are progressively recovering.

Though most European markets are stepping out of the crisis, the research reveals that the future of the European housing is still uncertain and full recovery will depend on many different factors.

Unlike previous housing market upturns, this time the recovery is led by price increases, while other market indicators such as house-building supply and sales are still low across Europe, with some exceptions.

Also many countries continue to face important mortgage constraints. While interest rates remained low during 2010, markets are likely to be very sensitive to any interest rate increases, the report warns.

Data published in the report attests to the volatility of the real estate market across Europe over the last two years. In Ireland, prices fell by almost 20% in 2009, followed by an 11% fall in 2010. At the other extreme, house prices in Slovakia grew the most last year, at about 11%, but this was preceded by a fall of about 17% in 2009. In the UK, a 5% rise in prices in 2009 was followed by a 3% fall in 2010. By contrast, Danish house prices fell in 2009 by 5%, but increased last year by almost 3%.

In other markets, Cyprus, Greece, Spain, Poland, Hungary, Italy, Iceland and the Netherlands all experienced house price declines in both 2009 and 2010. Swiss, Finnish and Swedish house prices increased by more than 5% last year, while in Norway prices increased by more than 10%.

The report's author, Professor Michael Ball, said: "Full recovery will not occur until housing markets are fully functioning again: with plentiful mortgage finance, revived house-building and extensive market turnover throughout all sectors. However, the residential sector in Europe is far from following the long term standstill that the US housing is experiencing.”