House prices inflated more in western European countries ahead of the financial crisis and declined more sharply after the bubble burst than they did in the United States, according to a newly published analysis.

The findings by Freddie Mac, the mortgage finance company owned by the US government, shows that the seeds of the housing crisis were as endemic in other countries as they were in the US. The study also counters the notion that the problem was an American creation that was exported abroad.

“What is surprising is how often the debate characterises boom-bust cycles in housing prices as though they are uniquely American,” wrote Frank Nothaft, Freddie Mac’s chief economist, in a blog posting on Monday. “They are not.”

From 1996 to 2006, Ireland, the United Kingdom, Spain, France, and Italy all saw real, inflation-adjusted, home prices increase more than they did in the US.

In Ireland, which had the biggest increase, home prices rose 182 per cent over that period. The UK saw home price inflation of 152 per cent, Spain 115 per cent, France 108 per cent, and Italy 51 per cent, according to Freddie Mac.

By contrast, US home prices ran up only 47 per cent over that time frame.

Home prices have since declined by double digits in most of those countries, but Ireland and the UK have experienced the biggest dips, of 25 per cent and 17 per cent respectively, compared with a 15 per cent fall in the US.

Mr Nothaft argues that the prevalence of 15- and 30-year fixed-rate mortgages in the US helped minimise price swings compared with Europe where the use of shorter, five-year mortgages are more common.

He cited a 2004 IMF study that compared house price volatility to the use of fixed-rate mortgages in about 20 countries. “The more fixed-rate mortgages were used, the less price fluctuation,” Mr. Nothaft said.

The notable exception was Germany which, although it has seen prices decline 13 per cent since 2006, did not experience the same pre-bubble inflation. That is partly because Germany went through its own property bubble in the years immediately following unification. But it also has to do with the way the German housing market is structured.

Borrowers in Germany are typically required to put up a downpayment of as much as 35 per cent and are subject to stiff pre-payment penalties. Meanwhile, public policy in the country has tended to favour supporting rental housing for the middle class, which has suppressed the home ownership rate to 42 per cent, compared with 67 per cent in the US and 80 per cent in Spain.

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