RICS European Housing Review 2005 – University of Reading
08 March 2005
Housing markets across Europe have strengthened over the past year, with all the major market indicators; house prices, transactions, mortgages and housebuilding, all showing strong growth, according to the RICS' European Housing Review 2005 authored by Professor Michael Ball (Real Estate & Planning). France, Spain and Ireland all maintained double-digit house price inflation rates. The UK alone saw its housing market decline significantly in the latter part of the year after a series of interest rate rises. From rising at double digit levels in the first half of the year, the UK market saw its fortunes reversed as house prices stopped growing and mortgage demand fell significantly. Nevertheless, year-end prices were still markedly higher than in 2003 as a result of the strong increase in early 2004. It would appear that the UK boom could be coming to its end, although this will depend on interest rates and forthcoming house sales in 2005's spring season. Even Germany's long-term stagnant market appears to be picking up as owner-occupiers increase their mortgage demands. Out of the 17 European markets analysed in the report, only Austria and Hungary had a relatively poor housing market year in 2004. Many European countries saw price rises between 5 and 8%, including Belgium, Italy, Sweden, Denmark, Finland and Portugal. The RICS' European Housing Review 2005 by UK housing expert and economist, Professor Michael Ball, examines the macroeconomic and demographic influences on the main European housing markets. Now in its sixth year, the report provides unique data and in-depth analysis covering a combined market of 460 million people. This year's report also covers the 10 new EU accession countries for the first time, with in-depth chapters on Hungary and Poland and an overview on the remaining eight. The new EU countries in central and eastern Europe have more affordable but more precarious housing markets, which means foreign investors should exercise caution. A big issue facing the new accession countries is quality of housing as they are faced with the task of overhauling the legacy of poor quality housing from the post-war Soviet years. Some countries still lack an adequate legal property infrastructure to effect necessary improvements. The report predicts that 2005 is likely to see continued price growth although market conditions will probably worsen significantly towards the end of the year. RICS chief economist, Milan Khatri, said: "The prospect of a housing market slowdown in Europe has risen given the sluggish nature of real economic activity. However, buoyant mortgage markets paint a very different picture for the market outlook. Very low interest rates and increased competitive pressures in the mortgage industry are delivering solid growth in lending, which is likely to continue through much of 2005." Professor Ball, author of the report, added: "Low interest rates are likely to continue to stimulate housing demand across Europe in the first half of 2005. Yet changes may occur towards the end of the year as pressures for increases in eurozone interest rates grow and new housing supply continues to come on stream in EU markets." end Notes for editors For further information or a copy of the report, please contact Valerie Tesler at the RICS Press Office on +44 (0) 207 695 1682, email: vtesler@rics.org Michael Ball is professor of Urban and Property Economics at the Department of Real Estate and Planning in the Business School at the University of Reading.