ECB: Eurozone house-price recovery sustainable

A recent rise in eurozone property prices appears sustainable, the European Central Bank said, but the recovery is weaker than in past cycles and the eventual normalisation of interest rates poses some risks.

House prices fell sharply across the eurozone in 2009, then dipped again in 2012 and 2013, unwinding imbalances that built up before the financial crisis and putting the current recovery on a more solid footing, the ECB said in an economic bulletin yesterday.

House prices have risen since the second half of 2014 and the growth is sustainable as a mismatch between incomes and property prices has been corrected, the ECB said.

“The recovery in euro area house prices appears to be relatively broad-based across groups of countries,” it said.

“However, it seems that the current recovery is weaker than the typical increase observed historically during the initial phase of an upturn in house prices after a trough.”

It added: “The current recovery in euro area house price growth seems less contingent on prices in metropolitan areas than in 2009-10.”

It said risks to financial stability from the rising prices appear limited for now. Credit growth is subdued and countries have implemented brakes on “potential house price and credit exuberance”.