The global house price boom continues in 2007, albeit at a much slower pace and with different set of countries.
A dramatic slowdown has taken place in several countries in Europe, despite an evident rise in the rate of price changes in Cyprus.
House prices in Estonia, 2005 and 2006’s star performer, rose only 5.68% y-o-y to Q1 2007, dramatically lower than the 77.52% y-o-y increase to Q1 2006.
Higher interest rates and an overheating market were the main causes of the slowdown. The key interest rate of the European Central Bank (ECB) has been raised nine times to 4% in June 2007, from its historic low of 2% in Nov 2006.
Other European countries that experienced lower house price changes y-o-y to Q1 2007 than in 2006 included France, Sweden, Ireland, Spain, Greece, the Netherlands, Switzerland and Portugal.
Ireland’s annual house price growth slowed to 7.44% y-o-y to Q1 2007, a deceleration from 12.07% y-o-y to Q1 2006. Apart from the higher interest rate, the heating issue on Stamp Duty also contributed to the decline.
Cyprus, on the other hand, enjoyed a 1.33% rise in the annual change in house prices in the first quarter of 2006, a figure that jumped to a 9,87% rise in the first quarter of 2007.
The U.S. house price rise also slowed to 4.07% y-o-y to Q1 2007, down from 12.78% y-o-y to Q1 2006. The Federal Funds rate has risen sharply from its low of 1% in May 2004 to its current level of 5.25%. The Fed has kept the rate unchanged since June 2006. This rate increase has meant trouble for sub-prime borrowers, leading to delayed payments and foreclosures.
Source: The Financial Mirror
