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Euro zone house prices keep rising but no bubble yet - ECB


11-04-2016

 

FRANKFURT The euro zone housing market is on its best run since the global financial crisis but prices on average are still only in line with fundamentals with no sign of a bubble last seen in 2007, the European Central Bank said on Thursday.

Keeping rates deep in negative territory, the ECB has fuelled concern that artificially low borrowing costs could encourage firms and households to borrow too much, inflating asset price bubbles that could undermine the bloc's hard-earned financial stability.

The residential property price upturn, which started in early 2014, is accelerating with prices rising by an annual 3.0 percent in the second quarter, up from 2.7 percent in the previous quarter, hitting its longer-term average.

"Measured in real terms – here adjusting house prices with the GDP deflator as a measure of underlying inflation – annual real house price growth has in fact moved above longer-term averages," the ECB said in an economic bulletin article.

Countries with above-average house price growth since 2014 include Germany, Austria, Estonia, Ireland, Luxembourg, and Portugal while Italy, Greece and Cyprus are still facing falling prices.

"The current recovery has lasted for just over two years and so is still at a fairly early stage," the ECB said. "The average duration of major upturns in historical data is close to nine years."

uk.reuters.com/

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