U.K., Spain housing markets face major corrections

[hsc-online]

Standard & Poor's Ratings Services said Europe's housing markets are finally, and overwhelmingly, turning down.

'And in those countries where the housing bubbles have been expanding for longer, Standard & Poor's (NYSE:MHP) believes the corrections could be severe and painful,' the agency added.

Particularly at risk are the U.K. housing market, where the financial crisis is exacerbating issues of affordability and general economic gloom, and the Spanish housing market, which is coming to terms with a largess of new homes, S&P said.

It added that, at the same time, there are signs that housing in Ireland is becoming more affordable, while a combination of low indebtedness and fiscal stimulus should help support the market in France.

S&P said the current deceleration in the U.K. market, which began in August 2007, could be attributed to the rise in interest rates from August 2006 to September 2007. It added that if that logic holds true, interest rate cuts since last December could see house price inflation bounce back in the second half of 2008.