European Housing: Solid but Cooling

After some countries' double-digit gains in 2005, euro zone property prices rose 6.4% in 2006. Still, overvaluation likely exists

Euro zone property markets have started to cool as a result of the European Central Bank's rate policy. The latest annual data, published in the ECB's May monthly report, show that euro zone house prices rose 6.0% year over year in the second half of 2006, down from 6.9% year over year in the first half. This means 2006 property price inflation slowed to 6.4% from 7.9% in 2005. The 12-country average conceals a certain amount of heterogeneity, but it appears that most countries saw moderation.

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