Europe’s Recession Is Still Dragging Down House Prices In Most European Markets

The plight of Europe’s homeowners looks set to continue this year as house prices keep falling in most European markets. Yet, the extent of the pain will vary significantly by country. Spain is still suffering a sharp correction. We forecast prices will fall by 7.8% this year, with little relief in sight. Other countries on Europe’s “periphery”, though, are seeing some light and the end of the tunnel. The free fall in Ireland’s housing market, where residential property prices have halved in value since 2007, now appears to be stabilizing. But here, like Spain, swathes of unsold housing stock will delay a recovery. Portugal, meanwhile, despite suffering similar economic woes, did not see a housing bubble, so house price declines now are more limited. Potential reforms in Portugal could help stem the bleeding in house prices as early as next year, in our view (Watch the related CreditMatters TV segments titled “European House Prices : Gloomy Outlook For 2013” and “Nouvelle Baisse Attendue en 2013 Pour Les Prix de l’Immobilier en Europe,” dated Jan. 17, 2013.).

In Europe’s “core”, the downturns in the Dutch and French housing markets appear to be accelerating. We forecast they’ll see nominal price declines of nearly 6% and 5%, respectively, this year, as rising unemployment, decelerating wages, and the prospect of austerity measures frightens off buyers. Only Germany is bucking the European trend, with a moderate 3% rise in residential prices forecast this year and next, on the back of wage increases and comparatively lower unemployment than in other European countries. Still, Germany’s rising market could hardly be described as a boom. It follows years of stagnation between 1999 and 2008, when most other markets rose considerably.


  • We forecast that prices will keep falling in most European residential real estate markets this year amid persisting economic uncertainties.
  • Spain’s housing market will likely suffer the heaviest price declines of nearly 8% year on year, followed by the Netherlands (5.9%) and France (5%).
  • The German market, though, should continue to see moderate price rises of 3%.
  • The long-term prospects for most markets are nevertheless more positive, as housing supply shortages and rising populations should underpin prices.

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