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Fragile recovery in the European residential - 2011 RICS European Housing Review


01 Mar 2011


Health & Consumers
Sustainable Dev.

Recovery is underway in the majority of European housing markets, but uncertainty remains in the region, with considerable performance variations, says the latest RICS European Housing Review launched today in Brussels (1 March 2010).

While housing markets were experiencing rising prices in Belgium, France, Germany and the Nordic countries during 2010, other markets were still facing problems. Ireland, Hungary and Cyprus experienced significant falls through the year and in the UK, Netherlands, Poland and Italy prices were slightly down.

On the other hand, in Spain, Greece and Portugal last year’s falls were quite moderate despite their economic problems, and the Baltic States are progressively recovering.

Though most European markets are stepping out of the crisis, the research reveals that the future of the European housing is still uncertain and full recovery will depend on many different factors.

Unlike previous housing market upturns, this time the recovery is led by price increases, while other market indicators such as housebuilding supply and sales are still low across Europe, with some exceptions. Also many countries continue to face important mortgage constraints. While interest rates remained low during 2010, markets are likely to be very sensitive to any interest rate increases.

The report's author, Professor Michael Ball, said:

"Full recovery will not occur until housing markets are fully functioning again: with plentiful mortgage finance, revived housebuilding and extensive market turnover throughout all sectors. However, the residential sector in Europe is far from following the long term standstill that the US housing is experiencing.”



House price changes in 2009 and 2010 (sources available in report):

Notes for editors:

Michael Ball is professor of Urban and Property Economics at the Department of Real Estate and Planning at the Business School at Reading University.

The full report and summary will be available online at:

Comments from RICS members working in different European housing markets are available upon request!

For more information:


Laura Lindberg

Media Relations Manager

RICS Europe

T: +32 (0)2 739 42 27

M: + 32(0)4 8647 33 45


Key detailed country findings:


*In Cyprus, the housing market continued to slowdown in 2010. The new RICS Cyprus index reported that apartment prices were 9% down in the first nine months of 2010 and houses prices down 5%, with the overall fall expected to be 7% for the year. Also transactions declined sharply, especially if we consider that foreign buyers’ presence dropped by 80% from the peak. There is little prospect of a significant pick-up in the market in 2011.



*France saw recovery this year in the residential market. The FNAIM existing homes asking price index shows some fluctuations throughout 2010, but around a flat trend. By contrast, the official Notaires-INSEE existing house price index suggested more significant house price rises of 9% over the year up to Q3 2010. Transaction levels have improved substantially, with the biggest sales growth

in new flats and small houses, while sales of larger properties continued to decline. Mortgage interest rates have been low and consequently affordability has been improving. Nonetheless, economic growth is only weak, the financial situation remains precarious and austerity measures will have an impact in the housing sector. The expectation is that house price growth will continue to be moderate.


* In Germany housing demand and confidence were boosted by the strength of the economy and there were attractive mortgage interest rates on offer. House prices grew by around 4% in 2010 compared to falls of around 2% in the previous year, according to the Hypoport index The housing market has behaved like no other in recent decades, with nominal price changes relatively moderate and steady in contrast to most markets around the world. It seems that the housing market is broadly in balance between supply and demand, even though housing supply is short in some cities and regions and consumers remain highly sensitive to adverse changes in housing costs. There seems to be limited prospects of significant price rises in the near future, especially given the problems of the eurozone.


*In Hungary, house prices continued to decline in 2010 at an annual rate of more than 10% during the second quarter of the year. With questions over economic policy and European financial markets, prospects for 2011 in the Hungarian residential market do not look promising.


*In Italy, signs of the housing market stabilising were beginning to appear in 2010, even if this country experienced one of the sharpest recession in Europe. The decline in house prices moderated in 2010, with around a 2% fall in nominal terms, according to Scenari Immobiliari, and a similar 1.6% drop in Nomisma’s 13 city average index. The overall price decline since the 2008 peak has been about 10% in real terms. Interest rates dropped significantly in 2009 and stayed low in 2010, and there is no housing supply overhang to worry about.


*In the Netherlands, the market has been flat in price terms for most of 2010, with some weakening in the final months of the year. Overall, prices have fallen moderately by 7% since their peak in 2008. However, transactions have experienced a more important backdrop (10% down in the third quarter 2010) compared to the previous year, by then, they had fallen by around 40% from their 2006 peak. The principal cause of the reduction in transactions remains subdued consumer confidence and weak demand. Mortgage lenders also remain cautious about market prospects and have continued to tighten lending criteria.


*In Poland, The decline in the new housing market abated in 2010, after prices had fallen by 8% in 2009. There was a further slight price decline of around 3% according to REAS, but sales and

housebuilding were both up on the previous year. In fact, developer starts were 50% higher.



*In Spain the housing market downturn continued during 2010. Housing demand in 2010 was held up by improvements in the availability and cost of finance with mortgage interest rates at record lows. There has been a 15% price fall from the peak of the boom for existing housing and probably somewhat less for new. Taking account of general price inflation, this suggests a roughly 22% real decline in values for existing homes, which is one of the largest in Europe to date.

Overall, the problems of the eurozone, high private sector debt, continuing excess housing supply and the sluggish rate of economic recovery suggest cautious prospects for 2011.



*In Sweden, the housing market continued booming through 2010. By the third quarter prices were up 5% on the year. Housing output remains at low levels, and with stimulus packages at an end, expectations for a sustained supply upturn are poor. Deep-seated housing supply problems in the

growing city regions, which had played such an important role in the earlier long house price boom, are destined to continue.



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