UK property falters as Europe grows

In the 2005 edition of its European Housing Review RICS looked into the factors affecting house prices across the continent, including the ten accession countries for the first time.

The 155-page report found housing markets across Europe strengthening, with France, Spain and Ireland all seeing property values growing by more than ten per cent.

"The UK alone saw its housing market decline significantly in the latter part of the year after a series of interest rate rises," RICS said today.

Elsewhere, of the 17 European markets analysed in detail, RICS found that only Austria and Hungary had a relatively poor property market in 2004.

Belgium, Italy, Sweden, Denmark, Finland and Portugal all saw price rises of between five and eight per cent.

The new EU countries in central and eastern Europe were characterised as having more affordable but riskier housing markets, with RICS urging foreign investors to exercise caution.

The quality of housing in the accession countries was seen as an issue, as the legacy of poorly built property from the post-war Soviet years is in need of being overhauled, RICS added.

Moreover, investors were warned that some countries "still lack an adequate legal property infrastructure to effect necessary improvements".

Looking forward, the report predicts that 2005 is set to see continued price growth, with conditions worsening towards the end of the year.

"Very low interest rates and increased competitive pressures in the mortgage industry are delivering solid growth in lending, which is likely to continue through much of 2005," said RICS chief economist, Milan Khatri.

Michael Ball, author of the report, added: "Low interest rates are likely to continue to stimulate housing demand across Europe in the first half of 2005.

"Yet changes may occur towards the end of the year as pressures for increases in eurozone interest rates grow and new housing supply continues to come on stream in EU markets."