EC 2014 Alert Mechanism Report on Macroeconomic Imbalances
The European Commission has published today its 2014 Alert Mechanism Report which provides an objective analysis of Member States’ economies based on a scoreboard of indicators that measure internal and external competitiveness. Among them, a 6% threshold in deflated house prices change was included.
In this specific regard, the Report shows that real house prices further adjusted in 2012, leaving 11 EU countries with substantial negative growth rates, in line with tightened credit conditions and household deleveraging efforts. Only in 5 did deflated house prices grow. Moreover, the correction accelerated in 2012 in 5 countries already facing a large cumulated fall since their peak. According to the European Commission, the downsizing of the property market comes along with policies towards rebalancing incentives away from home ownership and its debt financing. Important reforms aimed at fostering rental markets, lowering fiscal incentives for mortgage-related instruments or reducing household balance sheet vulnerability to income and interest rate shocks may contribute to reduce the volatility in housing markets and mitigate the economic impact of their ups and downs.