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MW: Eurozone house prices rise by fastest since 2007
 
Eurozone house prices rose at the fastest pace in more than nine years during the final three months of 2016, a sign the currency area's modest economic recovery is deepening.

The European Union's statistics agency said Friday that house prices in the three months through December 2016 were up 0.8% from the third quarter and 4.1% from the end of 2015. That was the largest annual rise since the third quarter of 2007, a year before the world-wide financial crisis was triggered by the collapse of U.S. investment bank Lehman Brothers.

The pickup in house prices reflects a steady decline in unemployment rates, as well as low interest rates. Rising house prices should support growth over the coming months, since homeowners should feel wealthier and therefore inclined to spend more.

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Among the larger eurozone economies, the pickup in prices was led by Germany, which boasts the strongest jobs market and has been less affected by the currency area's government debt and banking problems. Prices there were up 1.7% on the quarter, and 6.7% on the year, although increases have been sharper in some cities.


There were also clear signs of recovery in the countries worst hit by the financial crisis and the currency bloc's subsequent troubles. Spanish prices were up 4.4% on the year, and Irish prices were up 7.6%.

In common with other developed regions, eurozone house prices fell after the financial crisis, but began to rise again from mid-2010. Unlike the U.S. and elsewhere, eurozone house prices then fell once more and only began to rise again in mid-2014.

The start of that rebound coincided with the first of a series of stimulus measures announced by the European Central Bank that were designed to boost weak economic growth and very low inflation. Those stimulus programs have led to worries in Germany and elsewhere that prices of assets--including houses--could surge and sow the seeds of another financial crisis.

In a speech Thursday, Bundesbank President Jens Weidmann urged the ECB to consider reducing its monetary stimulus, warning that very low interest rates harbored "growing risks" for the stability of the eurozone's financial system.

"The central bank must be careful that its policies don't ultimately do more harm than good," Mr. Weidmann said.

But there are few signs of overheating in most housing markets and borrowing to fund home purchases has remained modest. According to ECB figures, mortgage lending in February was just 2.9% higher than in the same month of 2016.


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