A direct consequence of the EU crisis is that housing prices in South Europe have began to fall. For example take a look at the graph for Greece:
|Cyprus residential prices|
|Spain residential prices|
The above and all current developments indicate that the severe inflation of housing prices which had occurred during the early and mid-2000's was something of a bubble. Mind you, these are data just for the first quarter of 2012. You may only imagine how lower the prices of the second quarter will be.
The housing bubble seems about to burst in the EU (it already has in some countries) and it's not just prices in the South that have gone down. UK prices have fallen for the first time in 3 months as Britain's economy shrank by 0.7% in the second quarter of 2012, the most in 3 years. (for more details on the UK's housing market read here)
If one looks at ECB it seems that housing prices all over the EU are either stagnant or falling, with a few exceptions. So, many people are faced with a dilemma? Should you buy or should you keep on renting? The answer is not so obvious. The reason is that during a crisis rents are higher while housing prices are lower, since most people cannot afford to buy (fall in demand, thus prices fall) but they have to live somewhere (rise in demand, thus prices rise). In more distressed economies like the South, many still choose to live with their parents and thus both rent and property prices seem to fall, although the latter seem to take the most hits.
True, prices have fallen dearly since last year. This, however, is only the beginning of the downwards spiral which will run its course for at least the full 2013 in strong economies and last even more in the weaker ones. (I hope you can tell which is which!) Moments of a rise in the indexes may occur but these seem more like an slight upwards move right before a severe downwards movement in the stock market.