European House Prices Increase Raises Fear of Bubble
In many big European cities, prices have been rising for decades, pushed higher by a cocktail of low interest rates, land shortages and construction that cannot keep pace with demand. Despite the deep effects of the pandemic on Europe's economies, prompting comparisons with the 2008 financial crisis, property price rises have picked up speed over the last year. Demand from stay-at-home workers desperate for space for an office has contributed to the price surge, while unprecedented fiscal and monetary stimulus aimed at keeping economies afloat have poured more fuel on the fire. British Finance Minister Rishi Sunak’s March budget extended a temporary cut to property purchase tax and announced a new scheme to help first-time buyers struggling to raise a deposit. British house prices recorded their biggest monthly rise in more than 17 years last month. "What we were expecting to see was much the same as 2008 - that prices would drop," Kate Everett-Allan, Head of International Residential Research at property consultancy Knight Frank, said. In Berlin, prices are up 11% over the last year, the Global Property Guide, a residential property research site, showed. And rising rents are a big problem for the city, where only about 17.4% of the population own their house or apartment. In Germany as a whole, roughly 50% of the population are renting and are exposed to rising rents eating up more disposable income. Stockholm, Luxembourg, Moscow and Bratislava have all seen double digit rises over the last 12 months, though in a small number of cities, like Madrid, prices have fallen. Finland's central bank warned about levels of household debt, echoing concerns at Sweden's Riksbank and many other European authorities over the threat to the financial system. Swiss bank UBS highlights Munich, Frankfurt, Amsterdam, Paris and Zurich as cities at risk of a property bubble. Four of the twelve European cities in UBS's Global Real Estate Bubble Index are over-valued - including Stockholm - and only in Warsaw, Milan and Madrid were property prices reasonable.
Tags : INTERNATIONAL construction Knight Frank Property economy Europe financial crisis residential property Prices interest rates European cities land shortages