Usually when things start to slow down in the European housing market, it is as a direct result of dynamics of the US economy. While not everything is doom in Europe with some countries actually progressing, many suffer on the bottom line.
Markets like Spain and Ireland are hardest hit of all. Ireland especially has seen a dramatic downturn in property values with price drops of 7% last year after seeing some promising increases in 2006.
We would have all read about Spain by now and heard the horror stories of the many British Expats that lost their homes and property value of around 3% in 2007.
Britain is also suffering, even though London’s Central districts are still considered posh enough to be counted amongst Europe’s best. That said, the value of homes has sunk from 8% in 2007 to 2.5 % this year.
A slowdown in the French economy is also hurting its housing market, with similar recurrences in the Netherlands and Belgium.
Liam Bailey, head of residential real estate research at the London-based Knight Frank said: “Are the skies looking a little brighter? It is still too early to say.”
Data for the Baltic markets wasn’t sufficient enough to make it to this list because of lack of information from applicable governments.
“There was a peak in growth in the Baltic markets, but it’s over,” says Gareth Williams, Knight Frank senior research analyst. “You won’t see the 40% to 50% growth rates again in those countries.” The peak for Latvia was in the beginning of 2007; Lithuania was a little earlier, he says.
One of Europe’s best performer was Poland, with a phenomenal growth rate of 28% in 2007. The country tops the RICS’ survey of 21 leading economies in Europe. Hot on the heels of Poland was Cyprus which saw a rise of 15% from the year before at 9% and Iceland which recorded a healthy Increase from 7.6% to 15 %.
Market speculators blamed the rising interest rates by the European Central Bank (ECB) for last year’s downturn. To follow on from this, stabilisation of the market shouldn’t be expected too soon either.
Unlike the U.S. Federal Reserve Bank, the European Central Bank is a little shy to cut borrowing rates, which indicates that the effects of the credit crunch have yet to be experienced.
This news is negatively affecting Europe’s largest economy Germany.
While the German economy has been enjoying a mini economic renaissance in the last few years, its housing market has been slow to catch up. It doesn’t help to see that Germany has one of the world’s biggest rental market at 58%.
Some of Eastern Europe’s countries were also amongst the shining lights of property investment heaven. Bulgaria topped the list as the world’s fastest growing market with a stunning 32.2%, followed closely by Slovakia with 31.3% and Russia with 26.5%.
Opposed to this the Western areas of Europe have seen losses, especially Denmark, where property values fell by 9.6%.