Residential property price growth in the eurozone continues to exceed the long-term average with no sign of a bubble last seen in the run-up to the financial crisis in 2007, the European Central Bank (ECB) said in its latest Economic Bulletin.
Historically low interest rates and unconventional stimulus have driven down borrowing costs across the region, raising concerns among some experts at the ECB that the housing market could inadvertently overheat once again, undermining the bloc’s hard-earned financial stability.
“Valuation measures applied to euro-area aggregate data suggest that prices are currently broadly in line with fundamentals and show no signs of the excess seen in 2007,” the Frankfurt-based institution said.
“However, this aggregate perspective does not rule out excessive valuations and corresponding vulnerabilities at the country or regional level, especially when house price dynamics are combined with strong mortgage growth and high leverage,” it added.
House prices rose by an average of 3% in the second quarter of the year, following growth of 2.7% in the first quarter and 2.2% in the final three months of 2015, according to the central bank's aggregate residential property price indicator.
Countries with above-average home price growth since 2014 include Germany, Estonia, Ireland, Luxembourg, Austria and Portugal, according to the ECB.
Average growth has remained negative in Greece, Italy and Cyprus.
“While I currently see no sign of exuberance in the real estate market in the euro area as a whole, there’s no denying that some national markets are at risk of overheating,” said Bundesbank president Jens Weidmann in a statement.