Mortgage credit holds the key in Europe

3 April 2009

The recovery of the European property markets relies firmly on governments to solve the mortgage credit shortage, according to a study.

Demand for homes across Europe fell dramatically last year due to the credit crunch and global economic downturn, according to a report by Professor Michael Ball of Reading University.

Ball’s report reveals that property prices in the Baltic States experienced the sharpest falls, with Estonia down 23 per cent, followed closely by the UK, down 16 per cent, Ireland down 9 per cent and Norway dropping 8 per cent.

In Germany and Austria, demand has slowed due to a lack of credit and further moderate property price falls are expected in 2009.
Meanwhile in Italy sales fell for the first time in over a decade due to a fall in mortgage lending last year.

The report warns that the worsening global economic climate will lead to a further deterioration in the Spanish second homes sector.

In Central and Eastern Europe, the financial turbulence hit residential markets extremely hard; In Hungary transactions fell by 10 to 15 per cent in 2008 and property prices also dropped in Poland.

Continued mortgage constraints and the rising cost of foreign currency loans may lead to further falls.
In France, transactions of existing homes fell by 30 per cent in 2008 and prices are expected to continue to slide in 2009.

Property prices fell in the Netherlands and Belgium, following the nationalisation of some of the major mortgage lenders in those countries’.