We have become accustomed to house-price watching in the US and the UK, but it may be time to turn our attention more decisively towards the continent.
Julian Callow of Barclays Capital certainly thinks so.
And what’s worrying him isn’t so much the fallout from property binges in countries like Spain and Ireland, which analysts have long been warning about. Non, non, non. What’s worrying him is France. Note the following chart:
As he comments:
Figure 6 shows what unprecedented times we are in. Using a series for French house prices back to 1937, we see that the Q1 09 decline (-6.6% on the INSEE measure) is paving the way for a record annual drop for French house prices this year. This shows the consequences of the collapse in confidence, for the French market, which unlike those of Spain and Ireland, has not seen the degree of excess housing construction — yet still prices have slumped . Note that it is in countries that have seen particularly strong construction booms, such as Spain, Ireland and the Baltics, where the surge in unemployment rates is particularly high…This chiefly reflects a combination of the shedding of construction labour plus the knock-on consequences on domestic demand from real estate retrenchment.
And:
In conclusion, we consider that it is unlikely to be until 2011 that there could be a meaningful recovery in euro area house prices. The full extent of the deterioration should be offset by the fact that Germany already had a housing boom in the early 1990s and since then German house prices have been virtually flat, which in turn has lowered the German PE ratio and hence the euro area ratio (also it means that Germany has not had the excess ratio of construction investment to GDP present in various other euro area countries).
Oucherama!
Related links:
Negative equity hot spots - FT Alphaville
Se Vende - FT Alphaville
