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Euro Area Housing: Booming In Germany, At Peak In France

ByDanske Markets
Published 08/08/2013, 10:58 AM
Updated 05/14/2017, 06:45 AM

The euro area housing markets exhibit large differences, as shown in Danske Bank's Euro Area Housing Market Index below. Indeed, with regard to housing markets, the euro area looks like independent economies rather than a single market. Germany, France, Spain and Ireland appear to be at each of four distinct phases in a stylised housing market cycle, namely boom, bubble, bust and trough.

The German housing market is booming. German house prices have increased by more than 20% since 2009, after a decade with only minor changes. Housing market activity and construction activity are increasing and there is increasing demand for loans for house purchases. The development is supported by record-low interest rates on loans and further price increases are likely, as affordability is not stretched. It still appears far from being a bubble.

The French housing market appears to be at peak bubble levels. House prices have declined slightly since they reached an all-time high at the end of 2011. France saw only a minor fall in house prices over the financial crisis. Falling mortgage rates and undersupply of urban housing combined with government support for the housing sector (including zero interest-rate mortgages) have helped French house prices double over the past decade.

The Spanish housing market is in the middle of a bust. Spanish house prices have decreased by 30% since they peaked in 2008 and are still falling. The number of both housing starts and home sales is at a very low level. On a positive note credit tightening seems to be coming to an end. There are no signs of stabilisation in house prices yet.

To Read the Entire Report Please Click on the pdf File Below.

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