Cyprus, Ireland and Spain are the European countries that registered the sharpest fall on house prices as a result of their severe new supply overhangs and economic problems, according to the latest RICS (Royal Institution of Chartered Surveyors) European Housing Review.
The review also points out that prospects in Cyprus for 2012 are for continued housing market weakness and a further softening of prices.
In Cyprus, a noticeable change in 2011 was a considerable tightening of mortgage availability, resulting from financial turmoil as Cyprus’ banks were drawn into the Greek sovereign debt crisis. Little mortgage credit was available from the banks, especially in the second half of the year. This and the weak economy drew even the best residential areas into the housing price downswing.
Slowdown in the global economy and the eurozone debt crisis affects mortgage markets and housebuilding across Europe, whilst house prices weathered the storm until the end of 2011.
In 2011, prices in most European housing markets were flat or simply declined moderately, only slowing towards the end of the year. The most notable changes were reported in Switzerland, Norway, Iceland and France, where house prices experienced price rises of more than 5%.
“Outside of a few countries, house prices in 2011 were relatively stable across Europe and in the absence of new dramatic turmoil, major falls are not expected in the months to come. However, after five years of European housing downturn, full recovery is not on the horizon”, says the report's author, Professor Michael Ball.
He adds that the future of the housing market in Europe will clearly depend on a good supply of mortgage credit and the ability to cope with the economic and financial crisis in the Eurozone.
“But on-going austerity measures are not helping to ease the situation. Public intervention today is more likely to undermine, rather than stimulate, the residential market,” Ball points out.
In France, stimulus measures undertaken by the government helped to push up home prices and stop residential building decline. But signs of slowing were apparent late in the year, when many incentives were withdrawn to cope with France’s public deficit. In the Nordic countries, strong price growth experienced previously ended in 2011, with the exception of Norway and some recovery in Iceland. Sweden and Denmark even experienced moderate price falls.
The research shows a dramatic fall in the number of homes being built since 2007 across much of Europe, including in those markets with no supply overhang. Spain (-89 per cent) and Ireland (-86 per cent) registered the sharpest declines in residential building permits being granted, with only Switzerland experiencing an increase in the last five years.
