House price growth in Eurozone countries has been steadily decreasing for a number of months. The current slowdown in Eurozone housing markets could jeopardize the region’s economies. Many Eurozone countries have experienced exceptionally high growth levels over the past number of years and may find it difficult to adjust their economies accordingly.
Countries such as Ireland witnessed unprecedented growth in the housing and construction sectors in the years leading up to 2006 when they peaked, and have steadily slowed since then. Much of this growth has been attributed to low Eurozone interest rates, which bottomed out at around 2%. The end of 2005 saw the beginning of interest rate increases, a trend which continued throughout 2006 and 2007 to date, and saw interest rates doubling. This put increased pressure on borrowers and contributed to the marked slowdown in the housing market. Ireland is particularly susceptible to interest rate hikes, given the large proportion of variable rate mortgages that exist here.
It is thought that the expected average rate of increase for house prices in the Eurozone will stand at …