Housing prices in Europe dropped to the lowest mark for seven years. The sharpest rate of decline is expressed in the countries most affected by the financial crisis, where most of the wealth of citizens is invested in real estate, ee24.com reported, citing data from the European Central Bank (ECB).
The situation is different in each eurozone country. In Spain, still recovering from bursting housing bubble that caused thousands of houses to remain empty, there is a decline in house prices down to the level of 2003.
Germany, where only small number of people have their own housing (as opposed to Spain), is still experiencing a price increase, which is the fastest in the last 10 years. Meanwhile, Italy, the eternal sore spot of eurozone, has been watching prices fall to the lowest level in seven years, and they may fall even further in the near future.
The only place where things are even worse than in Spain is Ireland. There the housing prices, according to Yolanda Barnes, head of global research at Savills Property Group, are at the lowest level since 2000. In contrast, Austria that, just like Germany, has historically low unemployment rate and small number of private house owners, the prices rose again. In fact, they are at the 12-year maximum.
From all the eurozone countries that held interest rates at a low level during the crisis and appealed for applying austerity measures to the affected countries, the Netherlands stand out because its real estate market is in decline and the housing prices are lowest in 10 years.
German property boom that occurred in large cities like Munich, Frankfurt and Berlin partially regains desire of the population to favorably invest money in the conditions when interest rates on deposits are minimal. The Bundesbank is concerned about this state of things.
Since the moment when ECB began to establish the interest rate for the whole eurozone, the German central bank was left with only one way to influence the markets that is to take macro-prudential measures, such as modifying mortgage LTV (loan-to-value) Alexander Koch, an economist at the Munich branch of UniCredit, notes that if we look back at the German real estate in a longer term (since 1990) we can see that housing prices showed a less sharp growth than in countries with bubbles on real estate markets, such as Spain and Ireland.
Less than half of all German households have their own housing, as compared with 80% in Spain and 77% in Cyprus. Ms. Barnes also noted that the sharp rise in the German market was influenced, among other factors, by maturing residents of regions where traditionally housing is bought by more mature people.
Study on the relationship of the housing prices and the level of unemployment in Germany conducted by UniCredit showed that house prices fell steadily for several years after the unemployment rate reached the worst level. So, to sum it up we'll refer to Alexander Koch again: "There is a simple and strict rule: do not invest in real estate in countries with high housing prices and poor state of labor market".
Text: Ivan Ulitin, ee24.com