RICS Remain Upbeat

RICS Upbeat about European Housing

Low interest rates and reviving economies have helped housing markets across much of Europe to avoid meltdown, according to RICS.

The European housing crash has been relatively short-lived and the downturn appears more limited than that of the early 1990s, according to the Royal Institute of Chartered Surveyors’ 2010 European Housing Review.

However, the report admitted that transaction levels are unlikely to recover to mid-decade boom levels and house building is still sharply down. The report also recognised a “horseshoe” of countries around the edge of Europe where housing markets are still fraught – Ireland, Spain, Greece, Eastern Europe and the Baltic States.

Although European central banks were slow off the mark when the economic crisis began, lower interest rates and improved liquidity provided a “great stimulus to Europe’s housing markets in 2009,” the report said.

Lower interest rates have benefited existing homeowners and helped to keep mortgage defaults lower than expected, it added. “This is in marked contrast to the early 1990s housing market downturn, when foreclosures helped to push down house prices and prolong depressed market conditions.”

The report also made some optimistic points about future recovery, although it recognised the current market’s uncertainty and fragility. “Double-dips are extremely rare in housing markets,” it said. “Most of Europe’s economies are recovering which tends to favour housing demand. Rising housing demand itself will quickly confront the problem of limited supply, given the persistent problems facing house building industries.

“Mortgage finance is constrained but financial markets are improving and, in any case, monetary authorities and governments will be reluctant to risk jeopardising the recoveries in their financial, mortgage and housing markets, particularly after all the effort made to put them on the path to recovery.”

Opp.org.uk, March 2010