Eurostat, the European statistics agency, recently released the Q3 2012 results for its pan-European house price index (HPI).  The data charts house prices on a standardized basis for 2007-2012, baselined against Q2 2010 (=100).  The index tracks price changes of residential properties purchased by households (flats, detached houses, terraced houses, etc.), both newly-built and existing stock. The Member States’ HPIs are compiled by the national statistical institutes, while Eurostat calculates the euro area and EU HPIs.

The AIRO team have compiled these data into an interactive data visualization accessible on the AIRO website.

What the data allow is a comparison of whether house prices have gone up or down over time with respect to the baseline.  For example, if we consider Ireland against a baseline of 100 in Q2 2010, in Q3 2007 house prices were indexed at 151.7 but had fallen to 75.3 by Q2 2012.  In other words, house prices had halved in valued over that period.

What the data reveal is that during this period of European financial crisis property markets behaved in four different ways across Europe.

1. Prices have declined continuously, either steeply in the case of Ireland, Spain, Romania and Bulgaria or more modestly such as the Netherlands and Cyprus.

2. Prices declined and then have either levelled off (e.g. Denmark, Slovenia) or have bounced back modestly (Estonia, Latvia, Lithuania, which all experienced very dramatic and rapid declines).

3. Prices have bounced along within a few percentage points of the baseline (e.g., Austria, Czech Republic, France, Greece, Hungary, Italy, Malta, Slovenia, UK) and effectively have flatlined.

4. Prices have increased modestly but steadily (e.g., Belgium, Finland, Germany, Luxembourg, Sweden).

These differences arise due to issues such as the nature of the national housing markets (e.g. proportion of renters/owner-occupiers), the robustness of the wider economy during the crisis, and wider property market issues such as levels of oversupply where excess supply, coupled with a financial crisis linked to property, work to depress prices in the absence of sufficient demand that would halt decline.

There is tentative evidence that the Irish decline might be starting to level off, but we need a few more quarters of data to reveal whether this is a sustained trend.  The decline, however, has been the worst in Europe in terms of sustained, rapid decline with no levelling off or bounce back.

EU house price index

Justin Gleeson, Eoghan McCarthy, Rob Kitchin

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