Ireland leads European housing market slowdown

The Royal Institution of Chartered Surveyors (Rics) has published its European Housing Review, which shows a marked slowdown in house price growth across Europe in the second half of 2007.

The decline, primarily as a result of the credit squeeze, is one that is expected to continue during 2008.

However, the Rics is predicting that the UK is better placed than many of its neighbours for an early stabilisation of prices.

It also points out that interest rates are not rising as fast as has been the case during previous housing market downturns, stating: “this gives optimism that the current ‘correction’ would not be too great”.

In addition, the report says: “The European economy is still in good shape … the combination of markedly higher interest rates and a sudden, sharp recession, which last sent Europe’s housing markets tumbling in the early 1990s, is still remote.”

That being said, inflation in the eurozone is higher than the European Central Bank target of 2.0% and interest rates could rise again.

Last year, house prices rose fastest in Poland, while the maximum fall was recorded in Ireland, with prices tumbling by around 7%.

Prices in Cyprus accelerated, most likely in anticipation of its membership of the EU.

In the Baltic States, where strong house price growth was recorded between 2000 and 2006, increases in the early part of 2007 were wiped out later in the year, particularly in Estonia and Latvia.

In the Netherlands and Sweden, house price inflation fell during the second half of last year.

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