Monday 28 July 2008

Here in France, house prices don't dominate dinner table conversations the way the do in the UK. It's become quite British to boast about the doubling and even tripling in value of homes for those that bought in the late 1990s, when the boom really began booming.

Not any more. Now the talk is all about which area's housing prices are sliding faster into the mire and the growing number of buy-to-let landlords that have turned into negative equity casualties. Monday's survey by property consultants Home track will amplify the collective wail: house prices in England and Wales slid in July to 4.4 per cent lower than they were at the same time last year.

But property woes have also taken root here. Friday's Le Monde splashed with the news that the number of approved mortgages have decreased by 11 per cent, partly because the lenders can't get the money out of banks that have seen the sub prime crisis shake the US economy. Credit's never been as easy to get here as it is in the UK and it's getting tougher for those trying to get on the French housing ladder. That said, growth has been less spectacular here than elsewhere. And French people don't treat property as a pot of cash in the way owners in the UK do; even when things are going well, they don't use their homes to fund spending sprees.

It's easy to try to build up a picture of a European housing crisis. Ireland, seen as the great economic miracle of the last ten years, is in even more trouble than the UK. In Dublin alone, prices dipped by 10 per cent in 2008. And Spain's housing bubble, which accounted for nearly 20 per cent of its economy, has long burst, leaving between 700 thousand and a million empty properties.

There is a ray of property sunlight, though, and it's directed over Cyprus right now. Like Malta, the Cypriots embraced the Euro in January this year. Like Malta, it was already enjoying a property boom before the new money began rolling. The new currency has helped Cypriots sustain the good times, with prices set to grow by more than three per cent this year.

The country conspicuous by its absence in this blog is Germany, Europe's largest economy. It's a special case. While many of its European neighbours enjoyed galloping property prices, in part of Germany they plunged by up to 50 per cent. Its property market hasn't been helped by a strong tradition in renting. But that's changing. Investors are flocking to the capital, especially the trendy districts on the city's east side that were once hidden by the iron curtain. Prices there have stayed low. According to data from Deutsche Bank, at the end of 2007 you could pick up flats in East Berlin for around 2,600 Euros per square meter compared to more than 5, 000 Euros in Paris.