Last year caused significant damage to many American banks as a result of the difficulties encountered in repaying real estate loans. At the same time, some European credit and financial companies associated with the banking sector of the United States suffered from the mortgage crisis. The most distinctly negative impact on Europe of this crisis is also evident in real estate.
In the last 10 years in this industry on the European continent there has been an unprecedented rise in prices throughout its history. In France, Spain, the United Kingdom, and Ireland from 1997 to 2007, property values grew by 200% or more! In Paris, Madrid, Barcelona, Dublin, the price per square meter of area reaches 5 – 8 thousand euros and above.
Experts call this rapid rise in prices for apartments, houses, offices a peak, followed by a recession.
There is reason for such a forecast. After all, a difficult situation has already arisen when prices per square meter in Europe have risen to a dizzying height, however, real wages of people have grown far from the same proportion. Therefore, in European countries, it is likely that the same events may occur with non-repayment of bank loans for real estate, which in 2007 thoroughly shocked this area in the United States.
Symptoms already appear, make themselves felt and begin to cause anxiety. In a number of countries, primarily in France, Spain, Ireland, Denmark, where until recently real estate prices were rising by leaps and bounds, there has been a reversal. While the reduction in the cost of square meters of housing is small – in some countries by 2 – 3%, and in others to 8%.
But this is already a fait accompli – the real estate price decline trend has started. How it will develop, with what speed – time will tell. According to the specialized British institution London School of Economics, over the next two years real estate in Europe as a whole will fall in price by at least 30%, and in some countries even more. Nevertheless, investment in real estate is still considered in Europe a reliable niche for the preservation and subsequent increase of capital.
The crisis in the US market could not but affect other regions. In Western Europe today, too, there is no previous rise in prices anywhere, and in some places even their decline has been outlined. In the Spanish market, where since 1998, house prices have doubled, and in December 2006 the average price of a house was 276,300 euros, now the price level has stabilized and may fall by 0.2% in the first quarter of 2008. According to some forecasts, housing prices in Spain by 2009 may fall by 20%. At the same time, defaults on mortgages in Spain in the first half of 2007 reached a record level over the past four years.
In the French market, where over the past 11 years from 1996 to 2007 house prices have increased by 135%, now they have also stabilized. According to a study by Crédit Agricole Bank, in 2008 prices in the secondary housing market in France could fall by 5%, while in the new housing market, they should remain unchanged.
In Eastern European countries such as Bulgaria or Montenegro, the times when you could buy real estate for nothing have long passed. Prices here jumped sharply, but now they are also almost at their highest point, so buying a house in these regions is unlikely to bring a big profit today.
In 2007, no crisis was observed only on the real elite housing market, located in the best areas of the world.
In this market segment, London is now the leader, where the average price of elite real estate in the city center is approximately 33650 euros / sq.m. The second place is occupied by the Principality of Monaco, where a square meter of the most prestigious housing costs an average of 32,100 euros.
The average price of a London apartment is now 473,830 euros. According to this indicator in Europe, only the capital of the Grand Duchy of Luxembourg is ahead of London, where an average apartment costs 485,000 euros. In third place is the Swiss Bern – 440,000 euros. In Dublin, the average apartment purchase price is now 368,000 euros, in Madrid – 357,000, in Stockholm – 325,000, in Paris – 297746, in Helsinki – 234165, in Vienna – 231000, in Amsterdam – 223000, in Brussels – 217462, in Lisbon – 185000 , in Athens – 198,000, in Berlin – 180,000, in Prague – 106,000.