Poland is the star of buoyant market

 
Poland was the ‘star performer’ in a European housing market that continued to defy gravity last year as prices forged further upwards, the Royal Institution of Chartered Surveyors has reported.

The price rises were despite interest rate rises and increased supply ‘in several buoyant housing markets’, according to the latest RICS European Housing Review. In fact consumers seem not to have baulked at the onset of interest rate rises and have continued to borrow at record levels.

One reason may well be that while the European central bank increased interest rates by 1.5 per cent in the 2005-2006 period, lenders failed to pass on the bulk of the rise – which may also explain why Europe did not follow the US into a house-building drought.

Fears of considerable house price adjustment in the ‘overheated UK, Spanish and Irish markets proved to be quite off the mark’, said RICS chief economist Milan Khatri. ‘Rising income and employment levels have cushioned these and other markets across Europe from rising interest rates, and the prospects for 2007 remain good as many economies have entered the year on a firm note’.

Whilst most of the 26 markets surveyed by RICS with the help of Savills did not perform at 2005 levels, many still rewarded savvy investors with double digit growth, said RICS.

Poland experienced the highest rate of house price increase, bettering 30 per cent. Poland, Norway, Greece, Ireland,, the UK, Switzerland (marginally), Lithuania, Hungary, and the Czech Republic experienced higher house price rises this year than last. In Estonia the 50 per cent plus rate plummeted to below 20 per cent.

The huge price rises seen in the central and eastern European countries seem to be slowing, but still offer substantial returns, RICS concluded.

‘ Poland is the star performer in terms of property price growth, followed by the other central and eastern European countries of the three Baltic States. However this is expected to slow as the various markets mature’, said Savills head of central and eastern European investment Henry Wilkes.

Not surprisingly, as the various central and east European economies develop (pre and post EU accession), big increases in individual earnings and the advent of mortgage products have led to considerable pent up demand for brand new and higher quality homes. People are desperate to move from their small, dilapidated apartments in the multiple, drab, Communist concrete block buildings’.

Of the ‘big four’ countries, only the UK outstripped its 2005 performance, with house prises rising by 10 per cent (an outcome that reflected ‘the UK’s dire land and new housing predicament, as lack of supply continues to artificially inflate the market’.

In France the rate of house price inflation dropped to 7 per cent – ‘a sign that one of Europe’s longest performing housing markets may be levelling out’. Germany’s house prices did not move at all, although there are signs that the housing market may begin to mirror the improving fortunes of the economy, said RICS. Italian prices increased at 4 per cent, slightly down on 2005.

In Denmark house prices climbed by 22 per cent. In Norway prices went up by 17 per cent, and in Sweden by 11 per cent.