* Eurostat releases residential property prices for first
* Euro zone property prices fall 2.5 pct in 3rd qtr, yr/yr
* Property crashes in Spain, Ireland intensified crisis
By Robin Emmott
BRUSSELS, Jan 31 Residential property prices in
Ireland have tumbled by 50 percent since their peak in late
2007, while Spain's real estate values have fallen by almost a
third, the EU's statistics office Eurostat said on Thursday.
The data, which has been released by Eurostat for the first
time, shows the extent of the property crash that followed the
global financial crisis from 2008 and propelled the euro zone
into its own debt crisis that nearly broke up the currency area.
A bursting of the property bubbles in Ireland, Spain and, to
a lesser extent, Portugal not only erased years of economic
growth but left banks with trillions of euros of bad loans and
has pushed up unemployment to record levels.
The magnitude of the losses meant Ireland needed a sovereign
rescue after the government moved to save its banks, drove Spain
to seek a bailout for its lenders, and deepened an economic
slump that spread across the euro zone last year.
But underscoring the sharp economic divergences across the
euro zone, house prices fell only 4 percent overall in the bloc
between their peak and the third quarter of 2012 because
property has retained its value or risen in the wealthier,
northern economies of Belgium, France and Germany.
In the most recent quarterly reading of the health of the
residential property market, Eurostat said real estate prices in
the 17 nations sharing the euro fell 2.5 percent in
July-to-September compared to the same period a year ago.
That was still the biggest drop since the third quarter of
2009, when prices fell 3 percent and the worst financial crisis
since the 1930s drove the euro zone into recession.
The weak property market will hold back households from
increasing their spending on the kind of consumer goods that
could help the euro zone's economic recovery this year.
Despite record low interest rates, consumers are reluctant
to spend when unemployment is at a record high and as
governments continue to cut spending to try to bring down their
Property prices are no longer in free-fall however.
Compared to the previous quarter, house prices in the
July-to-September period fell at a lower rate in Spain and
Portugal and grew 1.6 percent in Ireland in the third quarter.
No details were available for Germany, Europe's biggest
economy, but in France, prices rose for the first time in four
quarters by 0.9 percent.
The European Central Bank's decision to put its huge
financial weight behind the euro zone last year and buy the
bonds of governments in trouble if asked has helped ease the
crisis, but weak house prices show how far many countries are
from recovering from the downturn. Spain still has an inventory
of hundreds of thousands of unsold homes.
Even the Netherlands, one of the few remaining euro zone
countries with a triple A rating on its sovereign debt, has
suffered from the bloc's economic fallout and Dutch house prices
fell 8.7 percent in the third quarter.
On a quarterly basis, Italy and the Netherlands both saw
house prices fall by more than other euro zone peers, by 1.1
percent and 3.9 percent respectively.
(Reporting by Robin Emmott; Editing by Catherine Evans)