The eurozone housing market is at risk of a crash that threatens to derail the bloc’s post-Covid recovery following a debt-fueled property binge, the European Central Bank (ECB) has warned.
Property prices in Germany, the Netherlands and Austria are heavily exposed to a jump in interest rates, ECB officials said, after ultra-cheap lending sparked a surge in prices.
The error is in thinking that there is something called the “eurozone housing market”.
As the Spanish and Irish booms show, housing markets are more local than that. Which is one of those reasons why the eurozone doesn’t work of course. One of the major channels by which interest rates affect the economy is through domestic finances and mortgages. And if these vary, substantially, across an area then a single interest rate regime doesn’t work, does it?
This is also why we need a Northern Pound, a Bath and Bristol Peso, a Kentish Franc, etc.
Not really, but different interest rates in different parts of the pound-zone. Which does exist. A mortgage on a £750,000 cupboard in Westminster can be obtained at a different interest rate than a £50,000 three-bed house in Moss Side.
And yet we also have different interest rates for different loan purposes in different parts of the euro zone.