Economic Crisis and the Property Market-
The EU, the Economic Crisis and the Property Market- What Plan for the Future?
A great deal has been written about the current economic and financial crisis. A great deal has also been written about the property market in different European countries. Yet the property market is not being discussed at a European level, although the role of property in this crisis is a complex one. As well as the measures adopted by national governments the EU itself has announced plans to aid the European economy, albeit again with no specific mention of the property market. Therefore in the circumstances CEPI would like to put the question: why is there no discussion of property in the EU Economic Recovery Plan?
Firstly to state the obvious, property is hardly mentioned in the EC Treaties. Indeed any references to property at a European level are limited. But, with all respect to the founding fathers of the EU they could not have foreseen the effect that the crisis in the property market which originated in the sub-prime sector in the US would have on the EU economy, and consequently on the internal market. Times have changed and it is now time to acknowledge the role that property plays in the European economy and discuss ways of making it perform that role more efficiently.
More than ever we can see that European markets are moving together. Our own research into the trends in the European residential property market in 2008 shows the effects of the financial crisis. Whilst it is clear that in some countries the effects were felt earlier or harder than others, by the end of the year most European housing markets had been affected. It is also true that national markets are still different, but in this financial crisis the effect has spread rapidly and that effect is Europe wide. In particular liquidity and consequently the number of transactions, has reduced as the financial problems have spread.
Why is this important?
It is important that the property market is able to maintain a normal level of activity. It is important for the EU economy and European citizens, for professional mobility and the functioning of the internal market. It is also important for European consumer confidence which has suffered recently. There are many industries and businesses which support the property market, such as architects, builders and manufacturers of household equipment, so that the whole economy is affected. Indeed it is unlikely that the current crisis will end without this problem being resolved. It is time for the EU to look at what steps can and need to be taken to review and strengthen the structure of the market.
We acknowledge that there remain important differences between markets in Europe. There remain differences in the rates of home ownership, in structures of loans, tax treatment of homeowners, legal treatment and transfer of ownership etc. Demand for houses and consequently production also varies. However whilst those differences are clear it does not mean that there is no need for concerted action. The property finance markets are now more integrated than they have ever been due to securitization and developments in those markets and finance systems can have implications for monetary policy. These spill-over effects from the property market can cause problems for the economy as a whole.
European Central Bank President Jean-Claude Trichet has said that „growth in 2010 depends on us” . The future of the European residential property market also depends on action being taken now. What then, can we urge the EU legislator to do?
Acknowledge the importance of discussing the property market at a European level
Property is a matter of member state competence but the regulator cannot ignore the fact that it is of fundamental importance to European citizens, in an internal market where cross-border services and investment are increasing, and that this has an effect on the European economy. This applies even though national laws and regulations mean that property markets throughout Europe differ, the net effect is the same. Any attempt to deal with these problems must take a European view.
Aim to facilitate cross frontier transactions
The success of the internal market depends on companies and individuals being able to exercise their right to free movement, establishment and the offering of services in a Member State other than their own. The lack of liquidity in the mortgage market is a major factor depressing the number of transactions and professional mobility. CEPI supports all responsible measures aimed at improving the level of bank lending on acceptable terms to buyers at all levels of society.
Take measures to relaunch transactions
Many EU Member States have taken action to promote transactions in their particular country. The EU needs to consider what these are and what it can do to promote their effectiveness.
Harmonize the property professions
There is a need to ensure a level playing field across the EU for property professionals. In some EU countries the professions of property manager and estate agent are regulated, in others not at all. This creates discrepancies across the board, in valuations, sales and lettings. Harmonization would strengthen consumer protection and certainty both for consumers and for property professionals who wish to work cross-border.
Difficult market conditions tend to bring problems to the fore and mean that preventative action is important. Property professionals are facing both difficult times and changing markets. We would urge that this be seen as an opportunity to strengthen the structure of the professions in the interests of the European consumer.
 Speaking before the Economic and Monetary Affairs Committee of the European Parliament on 31.03.2009.