House prices in peripheral European countries that are most affected by the sovereign debt crisis are beginning to recover, but at different rates, according to Fitch, which says that the Portuguese housing market has stabilised but remains fragile.
"The Irish property market has left its difficulties and the Portuguese market has stabilised, but remains fragile. The Spanish market is expected to reach its lowest level around the beginning of 2015," reads a briefing note from the ratings agency.
Fitch added that "the Italian and Greek property markets, which were down because of extensive problems in the economy, not due to a downturn in the real estate market, are still falling but their economies are starting to recover and their housing market should follow this trend."
According to Fitch, "price stabilisation in the housing market in Portugal in 2013 may be premature as figures have been based on a low number of transactions," adding that limited access to housing finance remains the case, this could lead to a "decline in house prices in the future in Portugal.”
"The Spanish economy is growing and unemployment is falling which in the long run will help boost house prices. The market has an oversupply of properties, demand remains constrained by high unemployment and the cost of credit, and the real income of households is falling," according to Fitch.
The agency anticipates an increase of up to 9% in house prices in Ireland which had suffered the biggest drop in Europe, almost 50%, since the high point in 2007. During the last year home prices increased by an average 6% in Ireland with a much stronger recovery in urban areas, especially in Dublin.
"The economies of Portugal, Italy and Greece have started to improve. Anticipate timid growth in the Gross Domestic Product of these three countries in 2014 and 2015, but the housing market remains weak and we think there will be further price corrections before stabilisation."
In Italy, the "price correction has begun to slow but we expect house prices will continue to fall by 7%, all the way to -20%. This is a slight reduction compared to our previous forecast of 22%," admitted Fitch.
Finally, to Greece, where the agency found that the "limited funding and huge financial pressure on homeowners continues to put pressure on house prices. Anticipate a continued fall of 11%, down to -45%, before stabilising."
