UK house prices drop as the European market slows

UK house price declines slowed during 2011 as the overall European housing market remained subdued, according to the new European Housing Review 2012 published today (28 February) by the Royal Institution of Chartered Surveyors. 

Residential property in the UK saw overall prices fall by 1% in 2011. This relatively flat reading places the UK on a similar footing to several other European nations, although Germany, France, Switzerland and Norway all posted rises of 5% or more, says RICS.

Two of Europe’s hardest hit economies, Ireland and Spain, experienced the most significant falls with drops of 17% and 10% respectively.

Since the middle of 2007, overall house prices in the UK have fallen by almost a third. This is more significant a drop than seen in Spain which is down 27%, Italy down 14%, Germany down 11% and France down 8%, according to the report. Sweden and Switzerland have actually seen prices increase in the last five years.

A notable change across Europe since 2007 has been the dramatic decline in homes being built. During this period, the UK saw a 42% fall in residential building permits being granted, roughly in line with the European average. Spain saw a drop of 89% and Ireland a drop of 86%, which were the sharpest declines, with only Switzerland experiencing an increase.

With housing shortages already being reported across much of Europe, these low levels of construction should only serve to exacerbate the problem, the report explains.

Much of Europe in recent years has not experienced the same scale of mortgage shortages as the UK. However, the Eurozone crisis helped to generate a marked tightening in mortgage availability in the last quarter of 2011.
 
‘Real house prices in the UK have fallen by a third over the past four years, due to a combination of a weak housing market and general price inflation. This has been one of the largest declines in Europe and will help to underpin housing market recovery once economic growth picks up again,’ said Professor Michael Ball of the University of Reading, author of the RICS report.