Europeans have high hopes that the value of their houses will rise over the next five years, even if the next 12 months see prices remaining stagnant or falling.

Confidence in housing market prospects is shown in the latest Financial Times/Harris opinion poll, which reveals that among Europe’s biggest countries, the Italians, Spanish and British are most upbeat about longer-term price trends.

Why housing data collection in Europe is lagging behind – Jul-20The wider implications of house price inflation – Jul-20But the British are also gloomiest about the short term, with 42 per cent expecting the price of their house to fall over the next year.

The survey results coincide with the launch on Monday of the Financial Times’ interactive online European house price database, which for the first time brings together on one site statistics from across the ­Continent.

The latest FT database figures confirm that European housing markets have cooled markedly recently, with the UK and Ireland showing the most dramatic turnrounds. Among the remaining bright spots are Cyprus and Sweden, which are still reporting double-digit rates of price growth.

Trends in European house prices could help determine the region’s economic performance in coming years by affecting consumer confidence and spending. But housing markets, and their impact on economic growth, vary markedly across the Continent. Germans, for instance, are far more likely than other nationalities to rent their home, and if they are owners, they are far more likely to have a fixed-rate mortgage.

German house prices have remained flat or fallen over the past 15 years or so. Unsurprisingly, almost half of German owners expected the price of their house to remain unchanged over the next five years. Nevertheless, 40 per cent of Germans surveyed expected an increase over the same period. In the other large countries covered by the poll, 64 per cent of Italians, 57 per cent of Spaniards and 56 per cent of Britons expected prices to have increased by 2013.

In spite of such apparent faith in the long-term value of their houses, continental Europeans are still strongly in favour of government support for property markets – for instance by cutting property taxes or subsidising mortgages. Just 6 per cent of Italian, 10 per cent of the Spanish and 11 per cent of French respondents said governments should have no such involvement. But the Germans and British, at 24 per cent and 16 per cent, were warier about the role of government.

Demand for government action might be driven by gloom about the outlook for house prices over the next year. The results of the survey suggest that a majority of Europeans expect prices to remain flat over the next 12 months.

Still, in France, Italy, Spain and Germany the proportions expecting an increase in prices were larger than the shares expecting decreases.

Just 15 per cent in the UK expected prices to increase over the period.

News reported by The FT

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The number of new mortgages being approved for house purchase in Britain has dropped heavily for another month.

The Bank of England said 42,000 homes were approved in May, a 28% fall compared with the previous month and 64% down on a year ago.

This is the lowest since the Bank began reporting the figures in 1993 and lower than many analysts’ predictions.

Mortgage lending has slumped owing to the credit crunch with institutions reducing their willingness to lend.

The number of home loans approved have now fallen for 13 consecutive months, the Bank’s figures show.

Housing market

Philip Shaw, chief economist at analysts Investec, described the figures as “terrible”.

“The implications of this is that the market is going to remain pretty weak for some time with a significant downward movement in house prices” Ed Stansfield Capital Economics

“It is really symptomatic of what is going on the housing market. The real danger is there is a knock-on effect to consumer activity,” he said.

Recent figures from the British Bankers’ Association (BBA) on the number of new mortgage approvals to home buyers also showed a big drop, by 20% in May compared with April.

It blamed tighter lending criteria and a squeeze on household finances for the drop. BBA members account for about two-thirds of total UK mortgage lending.

The Council of Mortgage Lenders and the Royal Institution of Chartered Surveyors have warned that property sales this year would fall by between 35% and 40%.

The Land Registry revealed last week that the number of house sales slumped by 50% in March compared with the same month in 2007.

‘Change in attitude’

The Bank of England figures also showed a drop in the number of mortgage approvals for homeowners who were remortgaging.

That figure fell to 90,000 in May, down from 100,000 the previous month and below the monthly average over the previous six months of 104,000.

Mortgage lending as a whole showed its weakest rise for seven years at £4.1bn – some £3bn down on the average for the previous six months.

The general figures were weaker than many economists had predicted.

“They are clear evidence in the change in attitude among mortgage lenders and home buyers,” said Ed Stansfield, of Capital Economics.

“People no longer want to borrow and those that do want to borrow are not being allowed to by the lenders.

“The implications of this is that the market is going to remain pretty weak for some time with a significant downward movement in house prices. We are off the scale. We have never been anywhere near as low as this in activity levels and mortgage approvals.”

Major lenders will reveal their house price figures for June in the next few days.

The UK’s biggest mortgage lender, the Halifax, recently suggested that UK house prices would drop by 9% this year, a more severe fall than its previous forecast.

‘Looking to save’

Bernard Clarke, of the Council of Mortgage Lenders (CML), said he expected mortgage funding to be more easily available in the next six months, but house prices would continue to fall.

“We think that house prices by the end of this year will be around 7% lower than they were at the end of 2007 and clearly the shortage of mortgage funding is affecting demand in the house purchase market,” he said.

Meanwhile, new figures released by the Building Societies Association (BSA) show that lending in that sector also fell sharply in May.

Net lending by building societies in May was £125m compared with £1.2bn in May 2007.

Adrian Coles, director general of the BSA, said the lending figures reflected the “depressed state of the housing market”.

But he added that people are looking to save with building societies, with saving at £853m in May, up from £608m during the same month a year ago and the highest figure for May since 2002.

News reported by BBC