European Commission, (2012), Quarterly report on the euro area, 04/2012.
In view of the central role that overheating housing markets played in previous years in a number of euro area Member States, the latest Quarterly Report on the Euro Area presents an analytical toolkit for assessing housing market imbalances. It is centred around an analysis of cyclical overvaluation of house prices based on a filtering approach. This notably allows unsustainable developments such as pronounced boom and bust phases to be distinguished from milder cyclical movements, and enables euro area Member States to be grouped into different categories of housing market overvaluation. This filter-based analysis is complemented with alternative valuation methods for house prices, such as affordability metrics and fundamentals-based estimates, so as to establish a comprehensive and multi-layered approach to understanding house price dynamics.