UK Edition
Forget the footy: which Euro 16 nations have boom or bust housing markets?
If only the Euro 2016 tournament was won and lost on the streets, rather than the football pitch, and the goal was to achieve the fastest rate of property price growth. If that were the case, the three lions would surely be a contender to lift the trophy. In reality the bookies have given England a disappointing 1/9 chance of victory.
The property group CBRE has ranked all of the 16 competing nations on the buoyancy of their housing markets and how they have performed over the past five years to Q1 2016. This new property league table puts Roy Hodgson’s country through to the semi finals, thanks to the rapid house price growth racked up since the recession. Over the five-year period, prices in England climbed 26.8pc according to the study, taking the average price per square foot to £300.
However, as in football, we were outstripped by stronger performers; namely Turkey, Iceland and Austria. England came fourth and Sweden, fifth.
The random group is united by two things: the inverse correlation between likely footballing performance of the countries and house price growth; and that four of the five countries are not part of the crisis-hit eurozone but have been masters of their own recovery.
“There is not a single European housing market,” says Yolande Barnes, head of international research for Savills. “This list of countries illustrates that better than anything else.”
1 Turkey (winner: 91.3pc house price growth)
Turkey (which is vying to get into the European Union) topped the Euro 16 house price league. Despite sharing a border with Syria, which has been wracked by civil war since 2011, and finding itself at the heart of the current European migrant crisis, it still possesses the fastest rising house prices of all the tournament competitors with values up 91.3pc in the past five years to £46 per sq ft.
“Turkey is typical of an emerging economy and shows all those characteristics,” Barnes says, referring to its combination of low income per capita and rapid economic growth. “It’s the urbanisation of Istanbul that is driving these numbers. There is burgeoning young population who are new to housing investment and eager to buy.” Which is all well and good, she adds, as long as a bubble is not being fuelled by imprudent lending.
Jan Crosby, director of housing at KPMG puts escalating demand down to the development of a lending market. “Institutionalised mortgage lending is a relatively new thing in Turkey. Suddenly there is more banking power, and more readily available lending, and therefore a pump up in house prices,” he says.
Foreign investors are also circling the city according to the estate agency Knight Frank. “Strong levels of foreign investment, an expanding population, and a slowdown in construction explain the upward pressure on prices,” says Kate Everett-Allen, the firm’s head of international research.
2 Iceland (runner up: 42.1pc)
Iceland’s spike in house prices over the past five years, by 42.1pc to £139 per sq ft, reflects a late economic recovery after the collapse of country’s banking system and housing market in 2008, seen as an emblem of the global financial crisis.
Property prices are starting from a low base, and high-end developments in Reykjavik have pumped up the average house price, Crosby says. “Private, individual investors, especially from the US, are buying up property in the capital.”
3 Austria (semi-finalist: 27.6pc)
Austria’s house prices have grown 27.6pc over the past five years, despite meagre economic growth according to Oesterreichische Nationalbank.
While almost all parts of the country showed healthy growth, Vienna, which is the world’s best city to live in, in terms of quality of life – according to the 18th Mercer Quality of Life study – is pulling in investment from overseas buyers and institutional investors.
In the luxury residential market, 40pc of buyers are foreigners, mainly from Eastern European countries such as Russia and Ukraine, attracted to Austria by cultural similarities and a stable government.
“Vienna is seen as a safe haven for investment,” says Peter Marschall of Marschall Real Estate. Crosby echoes this sentiment, describing Vienna as a “hot” market for Russian money.
Knight Frank’s Alex Koch de Gooreynd, in an article on the Global Property Guide website, says that Italians, Swiss and American buyers are becoming an active part of the Austrian market.
4 England (semi-finalist: 26.8pc)
Of course, soaring property prices can be an economic own goal.
The other semi-finalist is England, which has a housing market renowned for its chronic shortage of reasonably priced homes and social housing. This, combined with an influx of foreign buyers since 2011, a strong pipeline of luxury developments, and slow wage growth has put the home ownership dream out of reach for many.
The average house prices to earnings ratio reached 5.89 last month according to the Office of National Statistics, the highest since April 2008 when the UK was entering recession.
House prices in London jumped 20pc in the year to June 2014, fuelling fears of a property price bubble in the capital. The rate of growth then started to slow in 2015 as the Chancellor increased stamp duty on transactions above £937,000 and the Bank of England introduced stricter mortgage lending.
Many renters across the country hope that house prices will fall and the Brexiteers believe that leaving the EU would lower prices, enabling more people to get on the ladder in the long term.
5 Sweden (a quarter finalist: 25.8pc)
Sweden (which came in fifth with price growth of 25.8pc) is also another example of a housing market in danger of overheating. HSBC warned in January that due to generous lending policies, “the pace of acceleration in the housing market points to a bubble.” The central bank has now cut its maximum mortgage term to 105 years – the average is 140 years.
At Savills, Barnes thinks talk of a bubble in Sweden is premature. “Sweden is an example of a global housing market that never appreciably stalled. Along with Australia and Canada, and countries rich in raw materials, it weathered the 2008 storm well.”
Top footballing teams knocked out
At the bottom of the league table you will find two of the world’s greatest footballing nations. Spain came 15th with a 29.5pc five-year fall to £124 per sq ft. Italy was ranked 13th with a 14pc fall in house prices to £180 per sq ft.
For the vulture funds, who have been patiently waiting for such price falls, now is the time to pile in. “We are seeing international developers moving into these markets,” says Jennet Siebris, the author of the CBRE report.
Just as excitment ahead of June’s Euro 2016 tournament builds, the international property community is feeling positive about the region’s multiple housing markets,– despite the looming EU referendum in the UK.
“After the global financial crisis momentum in the housing market has been fuelled more by equity than by debt,” Barnes says. “And all central banks have imposed sensible lending policies, which bodes well for healthy growth.”
Come on Europe!