Mortgage rates cause Euro housing market descent

Wednesday, 05 March 2008 12:00

Rising mortgage interest rates have caused property markets across Europe to slump but the UK's prices remain among the most robust.

Our continental cousins saw housing markets slow sharply during the second half of 2007 prompted by rising rates applied by the European Central Bank over the last 18 months, according to the Royal Institution of Chartered Surveyors (Rics).

But while the credit crunch is yet to have a major impact on the majority European nations, where household lending remains fluid, the UK has emerged as one of the few countries to experienced "noticeable drops in borrowing levels".

The comparison between the UK and the rest of Europe has been unveiled today as part of Rics' European Housing Review 2008, which also showed UK house prices were among the strongest in Europe showing eight per cent growth.

House prices in Ireland fell by an estimated seven per cent, making the country one of the worst performing markets along with the Baltic states.

Poland experienced the highest price increases, meanwhile, enjoying a 28 per cent growth. But Germany, France, Belgium, the Netherlands and Scandinavia all showed few signs of economic boom in the housing markets.

Professor Michael Ball, the report's author, said the trend looked set to continue in 2008.

"There are prospects for some house price falls during 2008, but the scale of any housing market downturn is likely to be far less than the downturn in the early 1990s," he said.

"The UK housing market looks much better placed than many others in Europe because of the greater interest rate flexibility."

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