European residential markets experience solid growth

Europe’s residential markets continue to experience solid growth in spite of concern about increasing affordability issues, mounting household debt and the sustainability of current price growth in a number of countries, according to Knight Frank.

In most markets price growth has slowed, however the underlying demographic, economic, financial fundamentals remain healthy which suggests a hard landing is unlikely. Exceptions to this could occur in localised areas which have seen and continue to see substantial new development and which risk possible oversupply if recent levels of construction are sustained.

Indeed, there are factors which point towards a further demand boost in those markets – predominantly in central and southern Europe - which have limited mortgage penetration and which are experiencing strong economic expansion.

The appetite for second homes, whether for personal use or for investment reasons, continues unabated, facilitated by ever increasing accessibility via new low cost air routes and the growth in supply of residential properties in both the mass and luxury sectors.

A return to recognisable quality, often in the form of internationally branded resort schemes, offering a mix of residential and leisure uses as well as security and property management

Increasing interest in alternative ownership options such as fractional and condominium ownership

Growing buyer awareness of market trends and performance and a willingness to undertake more detailed research before committing to purchases

Looking ahead, Knight Frank are upbeat about prospects in 2007. With no obvious major international shocks visible at this point in time and a continuing broadly benign economic and interest rate environment likely, Knight Frank see both buyer confidence and appetite remaining firm.

Certain markets will require caution – parts of southern Spain and Dubai, for example – however Knight Frank predict further capital growth in most markets. This growth will again be most apparent in the emerging markets where demand keeps pace or outstrips supply.