House prices start falling all over Europe
Having long resisted the economic crisis, this year showed a slight fall in house prices across Europe. In France, if we look at the example of Paris, after years of strong increases for old apartments, the average price per square metre reached a record €8.370 in the third quarter of 2011. But, as elsewhere in France and Europe, rising prices mark, are a sign of the times.
Prices have fallen by 1.1% in the first quarter of 2011 in Paris. The decline was more pronounced in the centre of the capital than in the suburbs. But the average cost per square metre in the French capital was still around €8.260 in late March 2011. In 2011, sales of old apartments had increased by 16% in the city, by 26% in the inner ring (départements 92, 93 and 94) and by 22% in the 4 outer ring departments (départements 77, 78, 91, 95). This situation caused great worry in the Chamber of Notaries of Paris, which stated that in the longer term, the “fundamental question of the gradual deterioration of the creditworthiness of households will remain unanswered”.
And although the price per square metre has slightly descended, Paris remains, along with London, one of the most expensive cities in Europe. In the provinces, the results are not the same. The price per square metre was, indeed, much lower in early 2012. With €1.850 being the average price in cities with more than 20,000 inhabitants - the price difference is widening when compared with the capital. Regions such as Alsace, Rhône-Alpes and Provence-Alpes-Côtes-d’Azur (PACA) are the most expensive with the average price being around €2,500 per square metre.
Spain in crisis
In Spain, the housing market collapsed in one year, falling by 26% in January and 31.8% in February. This decrease has been constant for three years. In order to buy, one must still be able to borrow. Contraction of mortgage credit should continue, according to the Bank of Spain. While their bad debt ratio has climbed in three years, more than 5%, banks have become very cautious now and give fewer mortgages.
Spanish banks also have to deal with the tens of thousands of buildings recovered from developers in default. Indeed, the speculative bubble has left behind, over a million unsold or unfinished new homes. Working through this surplus will take time and will not help the upturn in the market. This insolvency will only be exacerbated further due to the extreme austerity measures introduced by the new government.
It is also important to point out here that 60% of sales are now taking place in the more urban Spanish areas:
- the Community of Madrid
- the Valencian Community.
The decline in house prices was only 15% in the last two years in these regions, according to Spanish real estate appraisal company Tinsa - Tasaciones Inmobiliarias SA, while in other countries hit by the housing crisis, the fall was much more radical.
Rome still too expensive
In Italy, the real estate crisis has been going on, as in Spain, for three years. Prices fell by an average of 4% since the beginning of the year. Quoted prices of apartments in major cities remain high. For example, an apartment of thirty square metres located in the center of Rome, on the ground floor, without a kitchen, light or wardrobes, is for sale for €360.000. According to Tecnocasa, Italy’s most established real estate company, sales prices are expected to fall by 5% by the end of 2012 in most major Italian cities.
London begins to fall
In Britain too, prices have started to decline slightly. The average price for a house is now £166,000 (€205.000), according to the Nationwide Institute. The end of tax advantages for first-time buyers seems to have led the British to postpone their desires to invest in bricks and mortar. However the figures are random depending on the month and the various analysis. According to some real estate groups and agents, the number of sales would signal the beginning of a general market downturn. In London, the price per square metre is still around £8,000 (about €9.700), making it one of the most expensive cities in Europe, along with Paris.
Many British agents believe that the unfavorable macro-economic environment will continue to have a significant impact on prices, whereas the pressure of unemployment, as in Spain, and the difficulty in obtaining credit should lead to a stabilisation, if not a relapse. They forecast that the market will fall further over the remainder of 2012.