House prices across Europe are beginning to flatten with some exceptions, according to indices assembled by the Global Property Guide based on country sources, for the second quarter of 2007.
House prices in the Baltics experienced a considerable boom in 2005 and 2006. Latvia, Lithuania and Estonia witnessed at least 25% annual increases during 2005-2006. House price growth peaked at 71% at the beginning of 2006 in Estonia and have slowed since. Despite the slowing of house prices in the Baltics in Q2 2007, over the past year the Baltic countries were still among the top five performers in the world.
Lithuania’s house price growth remained at 25% y-o-y to July 2007. Indicators suggest Lithuania is the most economically stable among Baltic countries.
A notable slowdown in Europe was experienced in Ireland. Ireland’s monthly house price index has been dropping since March 2007 by an average of 0.6% per month.
Spain experienced its lowest house price increase in nine years. House prices rose by 5.80% y-o-y to Q2 2007, from a peak of 17% in 2003. Most house purchases in Spain are made with variable- rate mortgages, making the market vulnerable to interest rate changes.
Other European countries that so far this year experienced lower house price increases than in 2006 were Sweden, Finland, Italy and Switzerland.
House prices in Norway and the UK registered double-digit growth. In Norway they rose by 14.20% y-o-y to Q2 2007.