CEPI - European Association of Real Estate Professions

On 10 July the European Council issued country-specific recommendations to all EU Member States on their economic and fiscal policies. Notably the recommendations include references to the stability of national housing markets particularly in Denmark, the Netherlands and the United Kingdom, demonstrating that the EU is now taking a direct and active interest in the housing market in different countries and its impact on the EU economy.

The European Semester involves simultaneous monitoring by the Commission of the Member States' economic and fiscal policies, in accordance with common rules, during a six-month period every year. The economic surveillance tool applies “stabilisers” to the national economies so that action can be taken if they are judged to be exceeding the advised limits. House prices are one of the 10 key indicators now being monitored by the EU as part of the package of legislation known as the “six pack” which was introduced in November 2011. The EU can fine Member States up to 0.1% of their gross domestic product if house prices in a particular country increase by more than 6% in a single year.

The country-specific recommendations issued on 10 July relating to national housing markets are:

• Denmark – is to consider further preventive measures to strengthen the stability of the housing market in the medium term, including taking account of the results of the ongoing study by the Ministry of Business and Growth on the distribution of assets and liabilities across households and by reviewing the property value tax system and the municipal land value tax system.

• The Netherlands – is to reform the housing market by:

(i) Modifying the favourable tax treatment of home ownership, including phasing out mortgage interest deductibility and/or through the system of imputes rents.

(ii) Providing for a more market-orientated pricing mechanism in the rental market.

(iii) For social housing, aligning rents with household income.

• The United Kingdom – is to address the destabilising impact of high and volatile house prices and high household debt by implementing a comprehensive housing reform programme to increase housing supply and alleviate problems of affordability and the need for state subsidisation of housing. It is to pursue further reforms to the housing market, including the mortgage and rental markets, financial regulation and property taxation to prevent excessive volatility and distortions in the housing market.