19 Jul 2013
Flash: Europe at risk of housing crisis? – Goldman Sachs
FXstreet.com (New York) - The Economics Research team at Goldman Sachs compares and contrasts the housing situation across Europe and their respective outlooks
Housing price risks across Europe
In Germany, “house prices remain cheap on our preferred valuation metrics and momentum is now strongly positive. Meanwhile, in the UK, housing valuations are supported by a lack of housing supply and, relative to the cost of renting a house, purchase prices are below our estimate of long-term 'fair value' – recent UK policy initiatives are also helping to push prices higher.”
In Ireland, “national house prices have fallen by 50% from their pre-crisis peak – more than in any other peripheral economy – and the post-crisis housing adjustment appears to be more complete. House prices in Portugal grew moderately prior to the crisis and, for all the other risks that this economy faces, housing does not appear high amongst them. In Greece, the adjustment in house prices appears well progressed but momentum remains negative.”
In Spain, “house prices remain above our estimate of long-term fair value and momentum is significantly negative. In France and Italy, house price valuations appear relatively stretched, having registered sharp gains prior to the crisis and limited declines since. For these economies, we believe the housing market remains a key downside risk.”
Housing price risks across Europe
In Germany, “house prices remain cheap on our preferred valuation metrics and momentum is now strongly positive. Meanwhile, in the UK, housing valuations are supported by a lack of housing supply and, relative to the cost of renting a house, purchase prices are below our estimate of long-term 'fair value' – recent UK policy initiatives are also helping to push prices higher.”
In Ireland, “national house prices have fallen by 50% from their pre-crisis peak – more than in any other peripheral economy – and the post-crisis housing adjustment appears to be more complete. House prices in Portugal grew moderately prior to the crisis and, for all the other risks that this economy faces, housing does not appear high amongst them. In Greece, the adjustment in house prices appears well progressed but momentum remains negative.”
In Spain, “house prices remain above our estimate of long-term fair value and momentum is significantly negative. In France and Italy, house price valuations appear relatively stretched, having registered sharp gains prior to the crisis and limited declines since. For these economies, we believe the housing market remains a key downside risk.”