A significant number of European residential property markets are starting to recover with both sales and prices increasing, according to new report.
Low interest rates and reviving economies are driving the growth which is expected to continue but recovery will be more limited than the last major one in the 1990s, says the report from the Royal Institute of Chartered Surveyors (RICS).
Also vulnerable economies will continue to experience depressed markets and falling prices, the report warns.
Scandinavia and the UK are at the top of the recovery list. In Norway property prices increased 12%, and similar increases of 8% and 7% were seen in Finland and Sweden, respectively. Prices were up 1% in the UK for all of 2009, but up 10% from the lowest point in the market in April 2009.
Other markets experienced declines between 4% and 6%, including Germany, Italy, Netherlands and France, but RICS said those markets are also on the verge of stabilization and are poised for future growth.
‘The shallowness of the downturn in core European housing markets has surprised many commentators. But Europe is not the US, and the problems and policy responses have been different,’ explained Michael Ball, the report’s author.
‘Mortgage defaults have only risen modestly. Low interest rates and central bank support for mortgage markets have played key roles in bringing recovery,’ he added.
The worst markets were Ireland, Spain, Greece and most central and eastern European countries. The Baltic States were hit particularly hard with price falls ranging from 27% to 53% in 2009. Together, those countries form a geographic ‘unlucky horseshoe around the edges of Europe’, the report says.
‘Huge problems remain unfortunately for housing markets around the fringe of Europe which are still dragging down economies in a vicious circle and all European housing markets continue to face credit constraints and great uncertainty,’ said Ball.
Over supply is likely tom hold back recovery in some countries, most notably in Spain, Cyprus and Ireland where both unsold holiday homes and primary residences could bring these markets further problems, the report also points out.
The overall macro economic picture remains uncertain with weak growth across Europe. Total euro zone gross domestic product came in just 0.1% higher in the fourth quarter, knocking signs of a pre-recession recovery. Rising unemployment levels are also forecast to hit the property market.