Housing prices in the euro area have rise by about 7 per cent per year since the euro was launched in 1999 compared with about 1.5 per cent from 1994 to 1998, the European Central Bank said today.
The boom in house prices in the last four years compared to the previous trend was due to several factors common to euro zone countries, as well as national differences.
The delayed impact of growth and employment gains from 1997-2001, a drop in interest rates in many countries since the euro was introduced, the shifting of investment from share markets to real estate and the liberalisation of housing credit markets have all spurred house prices, the ECB said.
"Although almost all euro area countries have experienced an increase in residential property prices since 1999, the extent of the observed price changes has varied largely from country to country," the ECB said.
Spain, Ireland, The Netherlands, Greece and France all saw above-average price increases between 1999 and 2002 compared with the euro area average.
The launch of the single currency, which entailed a convergence of interest rates throughout the 12-nation euro area, likely contributed to the surge in housing prices in places such as Ireland, Spain and Greece, where interest rates had previously been high, the ECB said.
Price changes were below average in Austria and Germany over the past four years, which may reflect the more limited scope of interest rate convergence to stimulate the housing market.