House prices rising fast across Europe
LONDON – Low interest rates, sinking stock markets and poor returns on other investments are pushing house prices higher across much of Europe alongside the well-documented booms in Britain and the United States. From Ireland to Greece, Sweden to Spain, homeowners have been seeing their bricks-and-mortar assets easily outperform traditional market investments, sometimes registering well into double-digit annual gains. Flats in Italy’s financial center, Milan, have doubled in price over the past two years. Dublin prices are estimated to have risen up to 10 percent over the past six months alone, while the cost of a flat in Paris’s chic western suburbs is up 11.25 percent year-on-year. In Sweden, owner-occupied house prices in densely populated metropolitan areas rose 16 percent in the 12 months after stock markets began to decline in spring 2000, although they have since stabilised. «It’s an asset like any other,» said Philip Barleggs of Rothschild Asset Management. «It just happens to be one you can live in.» To be sure, there are some local factors at play. Athens house prices have been leaping primarily on the prospects of the 2004 Olympic Games, for example, while Berlin prices have slumped after a reunification-triggered boom in the early 1990s. But figures from a variety of official and institutional sources, combined with anecdotal evidence from estate agents and others, indicate an across-the-board trend for Europeans to plough their money into housing. Home security Various reasons are given, the most common being that interest rates, and hence mortgages, are at historically low levels – one of the most tangible benefits for some countries of eurozone membership. The Brussels-based European Mortgage Federation (EMF) reported on Thursday that outstanding home loans have continued to rise strongly – albeit at a slightly slower rate – even though Europe’s economy has slowed from the late 1990s bubble. It said outstanding mortgage loans in Europe rose by 200 billion euros ($197.4 billion) last year to a total of around 3.9 trillion euros, an increase of about 5.5 percent. According to EMF, the total was equivalent to about 40 percent of Europe’s GDP, underlining the size of the investment at issue. But apart from cheap loans, the boom in housing demand and thus prices may also be a result of the sinking stock markets that have shaken investors for close on three years. Ironically, the falling markets may be having distinct and contradictory effects. On the one hand, some investors have clearly been seeking literally solid returns in an investment climate of tumbling stocks and thin yields. «Lots of people are concerned about pension funds… and the current market environment makes property look like an attractive investment right now,» said James Montier, equity strategist at Dresdner Kleinwort Wasserstein. Swiss investment managers, for example, have been pulling out of equities and other traditional investments in favour of property. «Investors see it as the new safe haven,» said Edgar van Tuyll, strategist at private bank Pictet & Cie.
