Eurozone house prices jumped in the three months to June, a sign that the modest economic recovery may finally be boosting household wealth.
As in other parts of the world, house prices tumbled in the wake of the financial crisis. But after a brief rebound they resumed their decline as the eurozone entered its own sovereign debt crisis, and only began to rise again in the middle of last year.
Even then, the rise was modest, leaving house prices still well below their pre-crisis highs, particularly in countries such as Ireland and Spain where the collapse of property bubbles was most severe.
However, an enduring if unspectacular economic recovery, which has produced a slow decline in unemployment rates, appears to have finally propelled prices significantly higher in the second quarter.
The European Union’s statistics agency on Thursday said house prices across the currency area were 1.2% higher in the three months to June than they were in the three months to March, the sharpest increase since the second quarter of 2010. Compared with the second quarter of 2014, prices were up 1.1%, the largest rise since the second quarter of 2011.
The second-quarter rise was led by those countries that saw prices fall most sharply in the wake of the financial crisis. Cypriot prices surged 7.4% on the quarter, while Spanish prices rose by 4.1% and Portuguese prices by 3.7%. All three countries received bailouts from the eurozone and the International Monetary Fund, partly to help their banks deal with the consequences of weakening property markets.
Outside those economies that are recovering from deep crises, the rise in house prices were more modest. France recorded an increase of just 0.1% on the quarter, while the Netherlands an increase of 0.3%. Italian house prices continued their decline, while Eurostat didn't release figures for Germany.
The jump in prices may feed concerns that the European Central Bank’s efforts to stimulate economic growth and boost the inflation rate threatens a fresh bubble in asset prices.
The ECB in March launched a program of quantitative easing that will see it buy more than one trillion euros of mostly government bonds by the end of September 2016. QE programs work partly by pushing up the prices of assets.
However, the rise in prices may also be good news for the currency area. Rising house prices can underpin consumer confidence, making homeowners feel wealthier and more willing to spend.
Write to Paul Hannon at paul.hannon@wsj.com