US Property Crisis Spreads Its Tentacles Over The Rest Of Europe

The rest of Europe has now followed the US and UK and property prices are steadily heading southwards, as they too fall victim to the after effects of the property crisis. So, European countries such as Spain, which had seen a property boom till now and had geared up its supply to meet increased demand are suddenly finding themselves with a lot of property in their hands but no buyers as most of their customers from the US and the UK are busy fighting their battles in their own country and are now hard pressed for cash to invest outside.

According to a survey conducted by the RICS or the Royal Institution of Chartered Surveyors, property prices all over Europe are now under threat and the housing boom seems to have lost its momentum with some properties either losing the rise as compared to the inflation rates and some properties actually witnessing a fall in its market value due to an increase in the interest rates in the whole of Europe. The report commented that the European housing market had slowed down noticeably due to the knock on effects of the interest policies of the European Central Bank and the interest rate increases in general.

The cooling off of the property market is set to affect around 300,000 Britons, who have purchased a second home outside of Britain as many of them now struggle to pay off high mortgage loans. As the market now changes from a sellers market to a buyers one, property owners who are now paying more than double the interest of what they were paying four years ago are saddled with additional mortgage payments.

As a result, 'hot' properties such as those in Spain, which had become quite famous due to tourists flocking to this Mediterranean heaven, have now seen its growth come down to around 3% with chances of a further fall in the current year. Even other countries such as Scandinavia and France are facing a similar situation. There were also other countries such as Ireland, where property prices actually declined by around 7% even though it had witnessed a massive boom before the previous years.

Since many Britons were also hard hit by rising inflation in Britain, they tried to give out their properties abroad on rent in a bid to recover some of their investment back. But this has only led to a glut of properties coming into the market and hence prices of to-let properties have also come down. With most buyers now either unable to arrange finance to buy new properties or simply to scared to put in money in what seems to be a sinking market, property owners might have no choice but to sit tight and ride out the storm.

While many analysts predict that the property downturn will not be as severe as that of the 1990's, they however do agree that the current year and perhaps a part of the coming year could see the market get worse before it starts to recover. With banks tightening their rules due to a shortage in inter banking funds, many Britons who might be tempted to pick up a property in this falling market might find that they now need to shell out around 25% of the property value as an advance and that could put potential buyers off. The pumping in of Billions of pounds by the UK Government into the money market could help ease the situation in the future but a full comeback could take a lot more time and it will also depend on whether the UK and other European countries are able to get inflation under control.

Until external factors such as high fuel, food and energy rates do not come down along with the interest rates, these European countries will face a tough year as the property boom, especially in France and Spain where property rates seem to be crawling to a standstill and if the supply levels fall back, then there could still be some upward correction. But as each new day brings new skeletons out of the US and the UK financial markets, a proper upturn could be at least some time away.