Housing Sector in Europe Seen in Doldrums for 2009

Housing markets across Europe suffered steep declines in both prices and activity during 2008 and the situation isn't likely to improve much in 2009, according to an annual report published Thursday by the U.K.-based Royal Institution of Chartered Surveyors. A continued lack of mortgage-credit availability will keep European housing markets in the doldrums, the survey said. The report shows that while U.K. and Irish housing markets may have seen the longest stretch of declining prices, in the final quarter of 2008 house-price falls became apparent across much of Europe, with the steepest declines in Baltic states. House prices fell 23% in Estonia in 2008 from 2007, by 16% in the U.K., by 9% in Ireland and by 8% in Norway, RICS said. "The tightening in lending criteria by banks over the past year is now having a meaningful impact on a number of European housing markets," said Simon Rubinsohn, chief economist for RICS. The group said any housing-market recovery will probably be slow because mortgage financing is key to the market's long-term health. "The financial system has been battered because of mortgage finance, and the riskiness of holding mortgage debt for investors and lenders rises as house prices fall," RICS said. "Such feedback effects between housing markets and financial systems suggest that restoring confidence in housing finance is going to take a long time." Among the big four euro-zone economies, prices fell most in France, with prices of existing properties down 10% in the fourth quarter. Read more. (Subscription required.)