CEPI/JKG/marketinformation2009/trends2009 Trends in the European Residential Property Market 2009

How 2008 Began and Ended
A Patchy Recovery for Some in 2009


A legacy of rising prices…in most countries
An explosion in mortgage debt
The strength of the rental sector
Differences between the markets in Europe and the US


Finland, Sweden, Norway

Steep falls in prices: The Baltic States - Lithuania, Estonia, Latvia
Some common problems: Ireland, Spain

Some large falls in prices: Bulgaria, Hungary, Romania
Countries where prices fell but to a lesser extent: Poland, Czech Republic

Countries reporting continued falls: Denmark, Italy
Those moderately affected: The Netherlands, France
More stable markets: Germany, Austria, United Kingdom


CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected].

How 2008 Began and Ended

2008 was the year that fortunes changed in the European residential property market. The evolution of the
financial crisis originating from the sub-prime crisis which emerged in the US in 2007 resulted in difficult economic
and financial conditions with prices falling in most European countries. Rising oil prices, a strong euro and
increases in the cost of credit combined with rises in retail interest rates and more stringent lending criteria in
making investors nervous. 2008 was to see those initial nerves further tested as storm clouds gathered over the
The news for the market in 2008 was not al bad but as the year progressed it became increasingly difficult to
identify any bright spots. In general those countries which had developed house price bubbles after strong price
rises were the first and most seriously affected. However the scale of the problems in the financial system and the
impact of globalization meant that difficulties in the financial sector spread very quickly, even to those parts of
Europe not directly touched by the fundamental financial problems. Other countries which had survived most of
2008 relatively unscathed were hit hard at the end of the year by the maelstrom of financial difficulties translating
into threats to European economies.

A Patchy Recovery for Some in 2009

At the beginning of 2009 these financial difficulties and related problems were still evident, and the interesting
question is to what extent they continued to weigh on the market in different countries. European countries had
not been affected by the crisis equally. The road to recovery proved to be longer for some countries than for
others, at the end of 2009 some countries continued to face serious problems whilst others had seen their
markets recover. However in those countries where prices continued to fall, those falls were in some cases
substantial. This was in spite of low; sometimes historically record low, interest rates in most countries.
In effect the recovery in 2009 from the problems experienced in the previous year was very patchy, resulting in a
patchwork effect of countries, some experiencing serious difficulties which can be identified as resulting from
certain common problems. There were some large patches, for example the Baltic States which suffered similar
problems. Although Ireland and Spain differ in many ways they suffered some common problems. In other
counties problems were less evident, and there were signs of recovery albeit uneven. In some countries in
Northern Europe prices even rose by significant amounts.
These differences make it difficult to talk about the European housing market as a unified whole in spite of some
distinctive features which are evident for example when comparing Europe with the US. We will consider some of
these differences with reference to the figures reported for 2009 and look at some of the possible reasons for
those differences. It should also be noted that there are many different ways of recording price changes and that
the reliability of the statistics quoted varies greatly from country to country. That is why we conclude that we
continue to need better information about the market.

CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. PART ONE: HOUSING AND THE ECONOMIC CRISIS

To start with some comments of general application, it is not possible to look at the developments in the
European residential property market in 2009 without first considering the importance of the impact of the
economic crisis. This has been the subject of much discussion and research. Eurostat published recently its
annual report on "The Social Situation in the European Union 2009", including commentary on housing and social
exclusion. A number of factors which emerge from its investigation in the context of housing and the impact of the
economic crisis help to explain the recent development of the market in Europe.
The housing sector has been at the heart of the economic crisis (not just in Europe). Its importance is
demonstrated by the fact that home ownership is a major component of wealth in Europe. Almost 70% of
Europeans own their homes with a wide variation amongst countries, from around 54% in Germany and just
under 60% in Austria to nearly 90% in Hungary, Slovakia and Lithuania, with the value of the primary residence
representing more than 60% of household wealth in countries such as Finland, Germany, Italy Sweden and the
A legacy of rising prices… in most countries

In the years 1997 to 2007 prices more than doubled in 11 of the EU 15 member states, and in Finland increased
by 86%. For prices in eight of these countries the rate of increase was greater in the second half of the period
whilst in Greece and France prices almost trebled. However in Germany prices declined slightly, in Austria they
rose by 4% between 2002 and 2007, and in Portugal 9%.
House prices rose much faster than wages over the past ten years in most member states, with the exception of
Germany and Portugal. In France house prices more than doubled relative to average wages between 1997 and
2007, in Spain and the UK they rose by 85-86%, in Italy and Sweden by 70% and in Belgium, Denmark and the
Netherlands by 60-62%. However in Germany prices fell by -13% relative to wages and in Portugal by -2% over
the same period, and -7% in Austria over the last five years of the period.
2008 was the year when prices stabilized and falls were recorded. In Ireland prices began to fall in 2007 and in
the year up to the middle of 2009 prices fell in 10 of the 15 original member states and were stable in the
Netherlands, falling -10-12% in Denmark, Ireland, the UK and Malta and by -7-8% in Spain and France.
A number of the new member states had also seen marked increases in house prices before the financial crisis.
In Slovenia prices rose 1-14% between 2004 and 2006, in Poland prices rose by nearly 20% in 2007 and by 24%
in Slovakia. However the vulnerability of these markets was demonstrated by the fact that some countries then
saw large falls. In the year up to the middle of 2009 prices fell by -20% in Bulgaria, -31% in Estonia and -60% in
An explosion in mortgage debt

The years leading up to the financial crisis saw a parallel rise in mortgage debt relative to annual household
income, in some cases a very sharp rise, more than 200% in Denmark and the Netherlands. This increase is also
particularly marked in the new member states, although mortgage levels there remain generally well below those
in the EU 15.
In fact outstanding mortgage debt increased in all countries in the ten year period leading up to the financial
crisis, except for Germany. Between 1998 and 2007 mortgage debt more than tripled in Ireland relative to
household income, doubling in the last five years of this period from 80% of household income to 175%. There
was an increase in debt of over 2.5 times in Spain over a nine year period, rising to over 100% of household
income in the second part of the period. In the Netherlands and the United Kingdom there was an increase in
mortgage debt of about 80%, rising to twice household income in the Netherlands and nearly 1.4 times in the UK.
CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. Again Germany proved to be an exception with the amount of outstanding mortgage debt being slightly smaller in
relation to household income in 2007 than in 1998, and 7% smaller than in 2002.
In the new member states there was an even larger increase in borrowing. The growth in mortgage debt was at
least three times as great as the rise in household income in all countries between 2002 and 2007. In Estonia the
increase was more than five times the growth of household income over this period, reaching a level of more than
80% of household income, and in Latvia the ratio increased by a factor of nearly 8 to more than 60% of
household income. Whilst these increases were from a lower base than in other parts of Europe the levels of
mortgage debt reached were significant, to over 30% of household income in the Czech Republic and Lithuania,
and over 20% in Hungary and Slovakia.
These factors boosted consumer demand and economic growth in some member states, but proved to be
unsustainable. When the bubble in the housing market burst, it had an immediate effect on the construction
industry. For example in Spain employment fell by 21% in the year ending with the last quarter of 2008,
representing a loss of over half a million jobs.
The recession caused by the economic crisis and rising unemployment put pressure on the ability of households
to repay mortgages. Falling house prices and difficulties in obtaining loans also made it harder to obtain
borrowing to cover the cost of these loans. Some Eastern European countries faced a particular problem in that
much of the increase in lending was denominated in foreign currencies, mainly euros and Swiss francs. In
Poland, foreign currency loans comprised two thirds of the outstanding borrowing for housing purposes in
October 2008, in Hungary 60% of household borrowing in 2008 and in Romania nearly 90% at the end of 2007.
This exposes borrowers to the risk of currency fluctuations as certain currencies weakened with the economy.
Also the extent to which borrowers were able to benefit from falling interest rates varied due to reluctance on the
part of lenders to pass on the full reduction and the fact that a number of mortgages are fixed rate.

The strength of the rental sector

The extent of home ownership in the European Union also reflects the relative strength of the rental sector in
different countries. In Germany nearly half of all housing is rented, whilst in Austria, France and the Netherlands
the rental sector represents approximately 40% of the total. Spain and most of the new member states have very
small rental sectors. Within this sector there are also differences in the importance of social housing, nearly 75%
of all rented accommodation in the Netherlands as opposed to just under 40% in France. The Nordic countries
also have a relatively important social housing sector1.

Differences between the markets in Europe and the US

There has been much discussion of the origins of the financial crisis in the sub-prime crisis in the US and the
impact on the housing market in the US. Whilst there are similarities between housing markets in Europe and the
US, there are a number of differences which go some way to explaining the different performances of the
respective markets. Supply is more constrained in Europe, due to the greater availability of land in the US, the
mortgage market in the US is more developed leading to a more immediate response to access to borrowing, and
the situation regarding interest rates in Europe is more diverse, with countries including Spain and Italy having
variable rates as opposed to the long-term rates normal y applied in the US.
The cyclical correlation between house prices and mortgage debt is much higher in the US than in Europe, with a
particularly low correlation in Germany. Notably housing wealth in Europe forms a larger share of GDP than in the
US, with housing being the main form of wealth for many European households and land values being generally
higher2. Therefore the market in Europe has a number of distinctive features as well as important regional
1 Eurostat February 2010 "The Social Situation in the European Union 2009". 2 ECB Working Paper Series No1161/February 2010 "Housing Consumption and Monetary Policy How Different Are the US and the Euro Area". CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. PART TWO: THE RESIDENTIAL MARKET IN 2009 - A MARKET OF FOUR GROUPS
Looking at the development of the residential housing market in Europe in 2009 we can say that the market can
be divided loosely into four groups of different sizes, all with certain sub groups except for the first group. The first
group is the smallest and is made up of a few countries in which prices rose in 2009. These countries had not
experienced an earlier bubble in prices and were smaller economies which were quick to recover.
The second group is larger and very different in that it is made up of a number of countries which suffered large
falls in prices. In general these are countries which had seen an earlier expansion in their market and
considerable increases in household borrowing creating bubbles which proved to be unsustainable. Some, like
Spain had also seen a massive expansion in construction so that when the crisis hit there was an overhang of
unsold properties which created an excess of supply.
The third group consists of countries in Eastern Europe. They did not perform evenly, it is apparent that there is a
big difference for example between the performance of the market in Bulgaria and that in Poland. However these
markets were characterized by the economic boost and increased foreign investment that followed their
accession to the European Union. This, together with a tendency to have loans denominated in foreign currencies
which caused problems for borrowers as those currencies strengthened against domestic currencies, tended to
expose weaknesses in the structure of the markets. More positively for these countries, there were signs of
improvement at the end of the year.
The fourth group is even more diverse. Generally speaking this includes those countries in Western Europe which
did not fall within the first group of countries which suffered large losses. As such this group is not homogeneous
but represents, largely speaking those countries which saw relatively small losses or indeed experienced a
degree of stability. Some of these markets were relatively quick to recover, not being affected by the particular
problems which beset those countries in the second group.

Finland, Sweden, Norway

To start with the (smaller) group of countries where prices increased, there were several countries which saw
prices rise in 2009. In particular the Nordic countries experienced strong growth (with the notable exception of
Denmark), with prices rising in Finland, Sweden and Norway.
According to CEPI member association KVKL the housing market in Finland came to a standstill when the
economic crisis hit in autumn 2008 with very few transactions taking place. Low apartment prices attracted
particularly first-time buyers and investors to the market in spring 2009 leading to a shortage of supply by the
autumn fuel ed by lack of new construction and historically low interest rates. In the last quarter of the year
(compared to the same period in the previous year) prices rose by 7.9% for existing apartments and houses, with
stronger price rises for existing apartments in metropolitan areas (10+%) and an increase of 11.6% in Helsinki
whilst prices for new apartments grew by 3.5% in the country as a whole and 9% in metropolitan areas.

By the end of 2009 many of KVKL's member agencies were reporting some of the best sales results in their
history. However CEO and Managing Director of KVKL Jukka Malila does not expect the steep increases to
continue, saying that "if circumstances remain as they are now, price increases will slow especially in the growth
centres. In other parts of the country the development will probably be steadier". Recovery in the rate of
construction and interest rates will be important factors in the market.
On an annual basis KVKL reported a small decrease of -1.5% for the sale price of houses and -0.3% for
apartments, probably due to the slow start to the market at the beginning of the year. According to Statistics
Finland, rents increased on average by 4.09% in 2009 on an annual basis. Rents of non-subsidized rental
dwellings increased on a national basis by an average of 3.1% and government-subsidized rental dwellings by
5.1%. The average rent per square metre of non-subsidized rental dwellings was €10.07 on a national basis, and
of government-subsidized rental dwellings €8.93.
CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected].
In Sweden, Statistics Sweden reported an increase in prices for one or two-dwelling buildings of 7% on an annual
basis as of January 2010. Whilst some parts of Sweden (not metropolitan areas) did see some price falls over
this period this was not the case on an annual basis. The average price for a one or two-dwelling building in
Sweden was SEK 1954 000 (approximately €200.200) during the period November 2009 to January 2010.
In Norway, Statistics Norway reported that house prices remained unaltered from the third to the fourth quarter of
2009, having risen on an annual basis at the end of the fourth quarter of 2009 by 11.6%. In 2009 house prices
were 29% higher than the 2005 average, with the strongest increase in Stavanger (53%). There were small
increases in rents, with the most rises in large cities from the first quarter of 2009 to the fourth quarter of 2009, of
1.3% in Oslo, and 1.1% in Bergen, Trondheim, Stavanger and Tromsø. The average monthly rent for all tenants
was NOK 5 444 (approximately €694.239) in the fourth quarter of 2009.
CEPI member association NEF reported a modest increase for the year 2009 on an annual basis of 1% for
houses and 3% for apartments. Rents also increased slightly, 1% for houses and 1.6% for apartments.

The picture was very different in some other countries (forming a second and larger group). The economic and
financial crisis was not only the first global financial crisis since the Great Depression but was also unprecedented
in its spil overs. Imbalances which had been masked by low interest rates and narrow risk spreads alongside
housing booms in several countries were exposed by the crisis together with housing market vulnerabilities.
These imbalances were most pronounced in Iceland, Hungary and the Baltic States. Overextended households
were a major factor in the origins of the current crisis with implications for the transmission of the crisis from the
financial to the property sector.
The countries which saw the largest increases in household borrowing from 1997 to 2007 also in general saw the
fastest rise in house prices over this period, demonstrating a link between easy mortgage credit and rising house
prices. The countries which saw the largest increases in household borrowing before the crisis also tended to
experience the most serious subsequent recessions suggesting that the severity of recession was in part a
reflection of the degree to which the unsustainable level of borrowing was a factor in growth. Other factors,
including policy measures in different countries, could of course also affect the impact of the crisis3.
Some countries saw dramatic falls in prices, most notably the Baltic States, Ireland and Spain.
Steep falls in prices: The Baltic States - Lithuania, Estonia, Latvia

The Baltic States all saw prices fall steeply in 2009. Lithuania suffered a bad year in 2009 with activity in the
market the lowest that it had been for the last 6 years. Apartment prices in the major cities fell -27% (nearly
double the rate of -15% in 2008). There were some signs of increased activity by the end of the year. Prices also
dropped for houses in the major cities and their suburbs by an average of -30 -45% with significant drops in the
price of land and building costs. Rental prices also decreased by about -35 -40%. There are still large numbers of
unsold new apartments available4.
Estonia saw a fall in the sales volume of apartments in Tallinn of -54%. However there were signs at the end of
the year that the number of transactions was beginning to increase. In Harju County and Tallinn in the fourth
quarter of 2009 the average price decrease was -20%. For the rental market, prices decreased on an annual
basis by -35%, with the largest reductions being for expensive apartments5.
3 FRBSF Economic Let er 2010-01 January 11 2010. 4 Ober Haus Real Estate advisors Lithuanian Residential Real Estate Q4 2009. 5 Ober Haus ibid. Estonian Residential Real Estate Q4 2009. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. Latvia suffered a catastrophic year with CEPI member association Lanida reporting a fall in prices on an annual
basis of -30% for houses and -40% for apartments. Rents for houses fell by -30-40% and for apartments by -50-
60%. The number of building permits issued (by comparison with 2008) fel by 40% and the turnover of estate
agents fell by 50%. 20% of estate agents in Latvia ceased operation in 2009. The Latvian economy was badly hit
by the economic and financial crisis.
According to the International Monetary Fund Latvia has suffered one of the deepest recessions in the world, with
a decline in its GDP of about 18% in 2009 and unemployment above 20%. At the beginning of 2009 the country
was provided with a €7.5 billion support package from the international community to keep its economy afloat.
Between 2000 and 2007 Latvia was one of the fastest growing economies in the world, growing at an annual rate
of 9%. Much of the demand caused by the growth in the economy was channeled into property with a great deal
of foreign investment, so that by the end of 2007 foreign debt had increased above 125% of GDP. When the
crisis hit, foreign loans to Latvia stopped and the result was a deep recession which combined with the world
economic crisis turned into a severe economic crisis6. Consequently the correction was severe and the economic
situation remains difficult.

Some common problems: Ireland, Spain

Whilst being different both geographically and economically from the Baltic States, Ireland and Spain were also
similarly badly affected. Both Ireland and Spain had enjoyed housing booms following entry to the euro zone and
corresponding low interest rates. In both countries these booms were accompanied by a massive rise in the
number of new constructions so that when the recession hit both countries were affected by an oversupply made
worse by the number of unsold newly constructed properties and high rates of unemployment in the previously
booming construction sector and associated services.
In Ireland the market was abysmal in 2009. According to a report 7 commissioned by CEPI member association
IAVI, 2009 for property in Ireland "represented perhaps one of the bleakest and dismal years the market has
experienced in this country. Activity levels stagnated across virtually all sectors, while capital values continued to
fall. For those whose livelihood depends directly on the property sector, survival was the name of the game". At
the beginning of 2010 property prices were about 40% off their 2006 peak, with wide variations across property
types and locations. Very few sales took place in 2009 resulting in a large supply of unsold stock, although the
rental market did see reasonable levels of activity with falls of rents of between -15% and 23% over a two year
period depending on location.
Ireland has seen a fall in the number of lending institutions active in the market, resulting in a lack of availability of
finance on which low interest rates have had little impact. Information from IAVI indicates large falls in prices of
one and two bedroom apartments with slightly larger falls in second-hand than new (-22.2% and -21.6% in
Dublin) and larger four/five bedroom detached houses (-21.2% for new and -23.0% for second-hand in Dublin).
Houses in urban areas in Dublin and the rest of Leinster appear to have experienced larger falls in value in 2009
in comparison to those in Munster and Connaught (-20.0% for new 4/5 bed detached properties).
Figures published in the Permanent tsb/ESRI House Price Index for Ireland show that on average national house
prices fell by -18.5% in 2009, average national prices are now at the levels that they were at in April 2003, and
that there has been a decrease of 31.5% since the peak of the market in February 2007. The figures published
also show a continuing fall, with a reduction of -8.5% in average prices in the fourth quarter. However, these falls
follow a period of spectacular growth when national house prices had been rising by an average of 14.9% during
the ten year period leading up to 20068.

6 IMF Survey Magazine February 18, 2010 "After Severe Recession Stabilization in Latvia". 7 The Property Valuer published by Irish Auctioneers and Valuers Institute Volume 29-N0.1-January 2010. 8 Permanent tsb/Economic and Social Research Institute House Price Index-end of year figures 22/02/10. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. Much has been written about the problems of the property market in Spain. Official statistics issued at the end of
the year by the Instituto Nacional de Estadistica for the third quarter of 2009 registered a fall on an annual basis
of -7% for the country as a whole. The largest falls were recorded in the communities of Madrid (-11.0%) and Pais
Vasco (-10.4%). Figures issued in February 2010 by TINSA9 indicated a fall on an annual basis of -10% for the
end of 2009, although for January 2010 the rate of decline recorded decreased to -5.5%.
Whilst there are a number of sources for information about property prices in Spain they tend to be lagging
indicators and there is anecdotal evidence of greater falls in particular regions and sectors as well as some
differences in figures. CEPI member association CGCAFE reported a fall in rental prices of -4.8% for houses and
apartments. Loans to households for the purchase of property fell by -22% and the number of building permits by
-42%, again on an annual basis. CEPI member association CGCOAPI saw falls of -30% for the price of houses
and -20% for apartments.
The International Monetary Fund looked at developments in the Spanish housing sector in 2009 and noted some
particular features of the market which explain the downturn in its housing market. Spain had experienced a
decade-long housing boom having experienced changes due to democratization in the late 1970s and
membership of the EU in the mid 1980s. Greater access to global liquidity and low interest rates due to
membership of the EU brought increased investment and employment which in turn increased housing
affordability. Immigrants were attracted by jobs in construction and services and the number of households
Whilst the increase in house prices was comparable to that of other countries experiencing housing booms, a
notable difference was the increase in construction in Spain. In 2006 more housing units were under construction
in Spain than in Germany, France, Italy and the UK combined. When funding became difficult construction
stopped. Housing affordability had been eroded and households were highly indebted at variable interest rates.
The size of the construction sector had become unsustainable at 13% of employment and 9% of GDP in
residential investment. Consequently jobs in construction were lost causing unemployment in that and other
sectors and a fall in immigration. The number of households formed fell from its peak in 2006. The supply had
also been increased by the large number of holiday homes which made up one fourth of all units built. Housing
construction in 2206-2007 greatly exceeded sustainable levels, resulting in a large inventory of unsold stock,
although it is hard to estimate the actual amount because of the large number of second and empty homes.
Housing investment and construction employment is expected to more than halve from its 2007 peak, and it is
estimated that since 2001 house completions have exceeded household formation by one million units.
Real house prices in Spain started to decline at the end of 2007 and have fallen steadily since. Another important
factor in the market in Spain is the weakness of the rental market. Housing policy in Spain promotes ownership,
and Spain has the highest rate of home ownership (85% and rising) in the industrialized world. The weakness of
the rental market has made it difficult for it to absorb the excess supply of properties. All these factors indicate a
lag in the recovery of the market in Spain10
There were particular developments relevant to a third group of countries in Eastern Europe. As demonstrated earlier, some countries in Eastern Europe had seen dramatic price rises and expansion of their mortgage markets. In 2009 some also saw steep falls in prices. However this picture was not the same all over Eastern Europe. Bulgaria, Hungary and Romania were hard hit, but other countries including Poland and the Czech Republic less so. 9 TINSA Tasciones Immobiliarias 10 IMF Country Report No.09/12 April 2009 Spain: Selected Issues. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. Some large falls in prices: Bulgaria, Hungary, Romania

Bulgaria had benefited from foreign investment and prices had risen sharply, but according to figures from the
National Statistics Institute, 28 of the largest cities and towns in Bulgaria saw values decline by around -28% in
the third quarter of 2009 on an annual basis. At the end of the year prices had fallen by -26.36% and were
continuing to fall11.
In Hungary there was a decrease in the sales market with a lot of apartments remaining unsold in spite of a fall in
the number of new constructions. Hungary had also experienced severe economic problems. According to CEPI
member association HREA, prices of houses fell on an annual basis by -10%, apartments by between -9.5-13%
according to their construction. Rental prices also fell by -10% for houses and by 10% to 15% for apartments.
The number of building permits issued in 2009 compared with 2008 fell by -41%. Interest rates charged on
mortgages in Hungary were high, 9.16% for forint-denominated home loans, 7.65% for euro-denominated home
Measures were taken by the Hungarian government to support the market by providing assistance to borrowers
and revision of the housing support system in a package of solidarity measures, enabling for example borrowers
in difficulty to obtain bridging loans supported by a state guarantee. Buyers of new residential projects have seen
the introduction of incentives offered by developers, such as the right to rent a home for one or two years with the
option to apply for a loan to purchase it and offset the rent paid. In spite of such measures there was still a fall in
demand which was predicted to result in a 50% reduction in the turnover of the residential market by the end of
the year. However there was an increase in both demand and supply of rental properties12.
In Romania the situation in the residential market did not improve in 2009 with a limited number of projects and
increased stock of completed and unsold units. The market had seen spectacular growth in 2007 with
stabilization in 2008. In January 2010 asking prices for residential properties in Bucharest were on average -15%
compared to the third quarter of 2008. Part of the price correction can be accounted for by the appreciation of the
euro (in which prices are denominated) against the RON which was estimated at 18.5% in October 2009.13

Countries where prices fell but to a lesser extent: Poland, Czech Republic

In Poland, according to a survey conducted by CEPI Polish member association PREF, almost 70% of estate
agents reported a smaller number of transactions in 2009, with the largest fall being reported in Warsaw: some
agents there reported a fall in the volume of transactions of 50-90%. Houses and larger apartments were most
affected. There was some growth in the volume of transactions in some seaside locations or in smaller towns.
The fall in the value of the zloty made prices attractive for foreign investors. PREF fear that high land prices and
decreases in the affordability of credit will cause stagnation in the market and that legislation protecting tenants
discourages investment in rental housing.
According to Aleksander Scheller, President of PREF, there remain few transactions in spite of high demand.
Although banks have started again to offer mortgages of 100%, only those with high incomes can benefit so that
"only the most affluent 10% of Polish households meet the underwriting criteria, which effectively holds back
demand. Sel ers are aware that buyers have literally disappeared from the market, but price levels are very
similar to those of six months ago. There is common confidence that final y the market will recover and that gold
times will be back, perhaps with a little less gold, but certainly it wil improve. However, the transaction volume on
the Polish residential market will increase only if lenders start making loans to low income households".
It is expected that 2010 will be similar to 2009 with an increase in the supply of housing unlikely and recovery
dependent on the extent of the economic slowdown in Poland. Figures reported by PREF for 2009 show a fall in
11 Global Property Guide February 26 2010 "World's housing markets are mostly recovering, but the situation is patchy". 12 Otthon Centrum Residential Market Monitor 2009/1 13 REAS Bucharest Residential Market January 2010. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. the price of houses of -3.5% and -8% for apartments. Rents increased by 10% for houses and 13.5% for
The Czech Republic was one of the stronger performing countries in Eastern Europe. CEPI member association
ARK Cr reported a fall in the prices of houses of -2%, and -6.1% for apartments. Rental prices for houses fell by -
5%, with rental prices for apartments remaining unchanged.

Western Europe did not form a homogeneous group either in 2009. As wel as those countries already mentioned
which saw serious problems there were other countries within a fourth group which saw falls in prices to a varying
extent, although those differences within that group were quite large.
Countries reporting continued falls: Denmark, Italy

Denmark proved to be an exception to the gains seen in other Nordic countries. CEPI member associations DE
and ED reported a fall in the price of houses of -7.5% and apartments -5.7%. Rental prices increased by 3.6% for
both houses and apartments. Denmark had been badly affected by the financial crisis and an earlier housing
bubble and was one of the first countries to experience problems in both its banking sector and housing market in
Italy had been relatively stable in 2008 with small falls in the number of transactions. For 2009 CEPI member
association FIMAA reported a fall in the price of houses of -8% and -2% of apartments. Rental prices for houses
remained static whilst rental prices for apartments increased by 2%.
Those moderately affected: The Netherlands, France

The Netherlands experienced a weak market. According to CEPI member association NVM, prices of houses fell
by -2% on an annual basis, and prices of apartments by -0.5%. Rental prices for houses and apartments saw a
small increase of 2.75%. The volume of transactions fell by about 30% to 40% from that of 2008. Reasons for this
included difficulties in access to finance and uncertainty about the economy. There was a marked reduction in the
number of transactions at the higher end of the market, with the lower part of the market performing relatively
well. This had an effect on the income of estate agents, with falls in revenue of around 50%. There was more
activity in the rental market, with a marginal effect on prices as demonstrated, with evidence that people were
renting rather than buying.
In France, CEPI member association FNAIM reported a fall in prices for 2009 of -5.6% for houses and -4.2% for
apartments. Over a period of two years the prices of houses depreciated twice as fast as those of apartments,
with the price of houses at the end of 2009 being comparable to those of the second quarter of 2005 and that of
apartments reaching levels seen at the beginning of 2006. After a low point in autumn 2008 (at -10% per year)
the fall in prices gave way gradual y to stabilization in 200914.
CEPI member association SNPI noted a limited increase in the activity of property professionals in France. During
the last quarter of 2009 the number of transactions completed by estate agents and property managers increased
by 3.5% from the same period in 2008, following a fall of 119% on the total of the 12 previous months. It was
during autumn 2009 that the number of transactions began to increase, 3% for sales and 1% for rentals during
the last four months of the year. At the end of 2009 most property professionals anticipated an increase in activity
in the first quarter of 201015.
More stable markets: Germany, Austria, United Kingdom
14 FNAIM Lettre de conjoncture n.59-Janvier 2010. 15 SNPI Observatoire de Conjoncture Note n.35. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected].
In some countries the movements seen in the market were more moderate. In Germany movements in the
market remained limited and once again its market was a case apart. As mentioned previously Germany has a
history of long and gradual declines in prices, a low level of mortgage debt and also the continued existence of a
large rental sector.
Unlike some other European countries Germany had not experienced a property boom and prices remained
relatively stable. CEPI German member association IVD reported a small fall in prices for 2009, -1.3% for houses
and -1.4% for apartments. Rental prices saw a small increase, of 0.5% for houses and 0.8% for apartments.
There is little information readily available about the German market as a whole, particularly for the residential
market which is little researched by comparison to the commercial market.
For 2010 however IVD expects rents across Germany to increase whilst the development of purchase prices of
residential property will be uneven. The prices of single family homes and new build flats are likely to rise in the
larger German towns and cities. Otherwise it is unlikely that prices for existing residential property will see much
change. There is concern over the limited number of new flats available to rent, with a need for an increase in
construction, particularly in urban areas.
Austria experienced a stable year with little movement in prices. According to CEPI Austrian member association
FIV, the market for houses was very different according to the area, but the Vienna area saw a fall of around -2%
to -5%. For apartments, again the market varied according to location but in some areas, including the city of
Vienna, prices rose between 5-10%. The rental prices of apartments also increased by about 2- 3%.
After a difficult start to the year, the United Kingdom saw prices rise during the fourth quarter of 2009. For the
UK as a whole prices rose by 1.6% in the fourth quarter leading to an increase in the annual rate of change from -
3.0% in the third quarter to +3.4%, with houses in the Greater London area seeing the highest annual rate of
change at 7% and weaker growth in the northern and midland regions16. The market in the UK was characterized
by lack of supply and historically low interest rates together with an increase in inward investment due to the fall
in the value of sterling. There remains speculation about the strength of the market and how it will perform in
2010, particularly with all the uncertainties caused by the results of this year's general election.

Common factors can be identified to explain some of the differences in price developments in 2009, including the
extent to which different countries had experienced a housing boom, levels of mortgage debt in relation to
household income, exposure to currency exchange rates and declines in foreign investment in the case of some
Eastern European countries. However it is notable that there remain structural differences between the markets in
Europe relating to the extent of home ownership and the relative importance of the rental sector. Europe remains
a continent with strong regional variations and differences within national borders.
It also remains difficult to obtain accurate and up to date information about the housing markets in different
countries. The methods used to gather and report information differ in many ways. It is even more difficult to
obtain figures for the rental market. However these figures must have an importance for the development of the
internal market as they directly affect the mobility of European citizens. It is also clear that housing is an important
component of wealth in Europe and must weigh on the economy of the EU as a whole. This makes it vital that
information about the market and its importance to the European economy is improved.
In some European countries, the housing market will take longer to recover than others. The figures at the end of
2009 in most cases indicate gradual signs of improvement. However for 2010 predictions are cautious, even for
those countries which did not see large falls in prices in 2009. A large number of factors will affect recovery.
16 Nationwide House Prices 31 December 2009. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected]. One aspect which remains clear is the importance of professionalism in a difficult market. 2009 was a challenging
year for property professionals. Not only did they have to deal with a weak and volatile market, they have
increasingly to deal with matters of ever greater complexity such as changes in financial regulation, consumer
legislation and energy efficiency in buildings. These challenges cal for wel qualified and educated professionals
able to deal with challenging times.
CEPI aisbl
1 June 2010
CEPI (Conseil européen des Professions Immobilières) is the main European professional association for
estate agents and property managers representing 42 member associations in 25 countries. Thanks are given to
all CEPI member associations who collaborated in the compilation of this report. Details of all CEPI member
associations are available at .
For further information about the contents of this report and also CEPI and its activities please contact Xavier Ortegat or Janet Griffiths at CEPI aisbl avenue de Tervueren 36, bte 2, B - 1040 Brussels tel. +32 2 735 49 90, fax +32 2 735 99 88 [email protected] [email protected] . Remarks: All rights are reserved, copyright 2010 CEPI. No part of this report may be reproduced, stored or transmitted in any form or by any means without acknowledgement of the source. The information in this report concerns general trends and does not purport to be advice on any particular matter or project. It is not intended for use directly either in market forecasting or for investment decision purposes. CEPI aisbl, avenue de Tervueren 36 bte 2 B-1040 Brussels, tel: +32 2 735 49 90, fax: + 32 2 735 99 88,, [email protected].


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