European House Prices On The Rise

Housing markets across Europe are growing despite the stagnant economic growth posted by most countries – especially in the Eurozone.

The latest official house price figures issued by Eurostat, the statistics arm of the European Commission, show that only three out of 29 countries have housing markets with falling prices.

Average prices rises across the Eurozone were up 2.9%, while those for the European Economic Area – the European Union plus Iceland and Norway, increased by 3.8%.

No price data was available from Greece or Liechtenstein, the other EEA country.

The three countries with prices in the red were Croatia (-2.1%), Italy (-0.9%) and Cyprus (-0.6%).

Countries showing the highest rising prices are Sweden (14.2%), Hungary (10.3%) and Britain (7.1%).

The figures are for year-on-year growth until the end of last year.

Cap on 140-year mortgage borrowing

Rocketing house prices in Sweden have made households in the country the most indebted in Europe, owing an average 366% of annual income.

Business leaders have written open letters to the government deploring the cost of homes and the rents young workers have to pay.

“This is not a sustainable trend and one reason why companies like Spotify are looking to the US and other countries to develop their businesses,” said the letter.

In response, the government capped mortgage terms.

Previously, borrowing for a home had no time limit, but now it is set at 105 years because so many families had taken out mortgages that only their grandchildren could pay off.

The average loan term in Sweden is 140 years and a third are interest-only loans.

Under the new measure, borrowers will also have to repay a percentage of the loan each year as well as interest.

Price slow-down in some countries

Price changes between Q3 and Q4 2015 showed a different story, with the statistics revealing 10 countries with falling prices.

The highest drop was in Cyprus (-4.2%), while the highest quarter-on-quarter increase was 3/1% in Bulgaria.

The trend for European house prices shows a steady increase across the year – with 2015 Q1 showing a 2.4% rise on the same period 12 months earlier and posting 2.7% in Q2, 3.2% in Q3 and 3.8% in Q4.

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