A European housing market study by PricewaterhouseCoopers (PwC) has shown there are big differences in national housing market trends. While the UK’s and Netherlands’ markets remain buoyant, with house prices still increasing, the situation in Germany paints a very different picture.
The research showed short-term interest rates tend to affect short-term house price movements more in the UK and the Netherlands compared to other countries, and house prices in Germany continue to remain low compared with these markets.
Statistics compiled by the accountant over the last 35 years from the UK, Germany, France, Italy and the Netherlands indicate housing prices within individual countries are dissimilar. PwC accredits the differences to variations in owner occupation rates, mortgage lending levels and interest rate changes. The study has shown there is a link between house prices and household disposable income levels.
John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said: ‘Our analysis of housing market trends demonstrates a persistent divergence in house price movements across Europe. Although there is a clear link with household incomes in the long run, in the shorter term the housing market cycle in a particular country and the general economic cycle may not always fit closely together. This presents a challenge for monetary policy, especially in countries like the UK where we find interest rates have a significant effect on house price movements in the short term.’
Looking to the future, the report indicates house prices in the UK may fall. It states: ‘House prices in the Netherlands and, to a lesser degree, in the UK are currently significantly above their long run equilibrium levels. This suggests house prices in these two countries over the next few years may not only increase less rapidly than incomes, but may actually fall.’