Some European property markets, face chance of double dip as they are still overvalued

With the exception of Ireland, the price slump has slowed in many countries, including France, Italy, Spain and the Netherlands, according to the European Housing Market report from Standard & Poor’s.
 
‘We’re seeing some signs of house price stability across Europe. But a look at individual economies still shows a mixed picture. Even those markets where prices have bounced back may see their trends faltering. And in those that are likely still overvalued, prices could take a second dip later this year or in early 2011,’ said Standard & Poor’s chief economist in Europe, Jean-Michel Six.
    
‘Countries that are seeing a rebound in housing prices are by no means out of the woods yet. A second dip remains a possibility in several markets,’ added Six.
 
The S&P report says that France firmly leads the pack on the overvaluation side, standing at 18.5% above its long term average, whereas Germany appears undervalued by about 12.5% as the country largely stayed on the sidelines during the housing boom.
 
In the UK the affordability ratio highlights a large 21% overvaluation, which the ratings agency warns could spell some further price slippage, perhaps later this year. ‘The longevity of the current bounce back in prices remains a legitimate question, in our opinion. The market remains overvalued, albeit to a lesser extent than the French market,’ the report says.
 
‘House price affordability remains stretched for first time buyers relative to historical standards. Mortgage approvals have also pulled back to remain at historic lows after rising in 2009. Mortgage approvals typically constitute a reliable indicator of price movements three to six months ahead,’ it adds
 
Spain still has about 12% of overvalued prices to correct before the market regains long-term equilibrium while Ireland is about 12% undervalued.