Euro house prices to decline for ‘some time’
Euro-area house prices are likely to extend declines as rising unemployment curbs property demand and banks tighten lending conditions, the European Central Bank said.
“Against the background of the recent contraction in activity and employment, housing supply and demand dynamics suggest that euro-area house prices are likely to continue to moderate for some time to come,” the Frankfurt-based ECB said in its monthly bulletin today.
“Demand will remain subdued in the coming months, despite some tentative signs of stabilization.”
Falling property demand is curbing construction activity and restraining economic growth, particularly in Ireland and Spain, where housing slumps compounded the impact of the global financial crisis.
The Irish economy shrank for a second year in 2009 while the Spanish economy contracted for a seventh quarter in the three months through December.
“Generally, the countries experiencing the most pronounced corrections are those that exhibited the strongest house-price increases in the period to 2005,” the ECB said.
Home prices here plunged 18.5pc in December from a year earlier, according to a monthly index by Irish Life & Permanent, while Spanish house prices dropped an annual 6.2pc in the fourth quarter, the Ministry of Housing in Madrid said last month.