A significant number of European residential markets were starting to show signs of recovery as early as spring / summer 2009 and further revival is expected in 2010. Norway led the way with prices rising by 12%, followed by Finland where they rose by 8% and then Sweden, who saw a 7% increase. In the UK, prices rose by 1% in 2009 overall, but by 10% since their lowest point in April.
Low interest rates and reviving economies helped to avoid housing market meltdown across much of Europe. In Germany, Italy, Netherlands and France, last year's falls were relatively moderate (between -4% to -6%) and though today markets are still fragile, they are starting to stabilise and to see some price growth.
However countries with vulnerable economies will continue to experience depressed markets and falling prices. The worst performing markets of 2009 were Ireland, Spain, Greece, most central and eastern European countries, and especially the Baltic States where prices declined between -27% to -53% in 2009. Geographically, together they form an unlucky horseshoe around the edges of Europe.
The economies of Europe are only showing weak signs of growth and this will hold back housing markets, especially if unemployment continues to rise. Most European house building industries, with the exception of Germany and Switzerland, are also still suffering the impact of the global financial backlash and housing supply will need some time to recover.
The report's author, Professor Michael Ball, said: "The shallowness of the downturn in core European housing markets has surprised many commentators. But Europe is not the USA, and the problems and policy responses have been different. Mortgage defaults have only risen modestly. Low interest rates and central bank support for mortgage markets have played key roles in bringing recovery.
"Huge problems remain unfortunately. Housing markets around the fringe of Europe are still dragging down economies in a vicious circle and all European housing markets continue to face credit constraints and great uncertainty."
Simon Rubinsohn, RICS chief economist commented: "A combination of extraordinarily low interest rates and a raft of government measures have helped to put a floor under residential property markets in most European countries.
"A firmer tone to the macro news flow is also providing a layer of support with clear evidence that an economic recovery is now under way. Indeed, in a number of cases the boost to liquidity has pushed prices back in the direction of previous highs. However, other housing markets are continuing to labour. In particular, the overhang of supply remains a drag in Spain and Ireland."
