European housing markets slowed during 2007 all over the map, as the property boom came to a halt, mostly because prices become too high, according to the latest European Housing Review from the Royal Institute of Chartered Surveyors.
But even though the market is slowing, RICS seems quite confident that a dramatic correction in house prices is unlikely, saying that: The risk of a sharp downturn in economies, though ever present, is small. So, the combination of markedly higher interest rates and a sudden, sharp recession, which last sent Europes housing markets tumbling in the early 1990s is still remote. Also the European economy is still in good shape, with growth rates of 1.5% and 2.5% forecast for the Euro zone.
Countries in Scandinavia, the Mediterranean region and recent members of the EU experienced the greatest price rises in 2007, although even these counties were found to be slowing after the summer, with Denmark the first to experience price falls.
Cyprus, on the other hand, saw prices accelerate throughout the year, possibly boosted by the prospect of joining the Euro as well as an influx of foreign investment.
The worst performing country was Ireland, where prices fell by an estimated 7% following unprecedented growth, while the Baltic states have also seen a slowing of growth as prices in Tallinn and Riga fell by as much as 40%. Prices in Germany, which never really picked up as the rest of Europe boomed, also fell slightly.
Poland saw the highest increase of 2007 but sales have also been falling there since the summer, says the report, while there were no house price falls in Spain, despite the bad reports, although looking to 2008 there are many challenges to be met by that market.
The UK market performed extremely strongly in 2007, the report found, and although there was a slowing in price growth, the interest rate drops should help momentum to grow in the market once again.
For further information, visit www.rics.org.
