Natalie Harrison/Reuters

LONDON (Reuters) - House prices in Europe's euro zone will keep rising this year due to cheap loans and possibly a recovery in the German market, but growth rates in France and Spain may ease from heady levels, a Reuters poll of 26 economists shows.

Twenty-four economists surveyed between February 24 and March 2 said euro zone house prices would continue upwards over the next year. Two did not answer the question.

"House prices are still strongly increasing in most countries, especially in Spain, France and Italy. We are close to a peak, prices shouldn't fall but begin to slow down in 2005," said Olivier Eluere at Credit Agricole.

"Despite low credit rates, affordability has also deteriorated and is close to critical levels."

House price growth has varied widely across the euro zone. France, Spain and Ireland maintained double-digit house price inflation last year, while other countries including Belgium and Italy had gains of between five and eight percent, according to the Royal Institution of Chartered Surveyors (RICS).

Germany, Europe's largest economy, has suffered for 15 years from a glut of construction driven by speculation on a bigger demand boom than materialised with reunification in 1990.

But RICS said the German market had shown signs of revival at the end of 2004 and economists expect rising consumer confidence and a shift in government policy to push German house prices higher over the next year.

A majority of economists -- 14 out of 24 -- said the housing market had contributed a little to overall economic growth by boosting consumer spending and by stimulating building activity. Seven said it had contributed a lot and three said not much.

Some, including Rob Carnell at ING Financial Markets, said runaway house prices had provided a big boost to the economy.

"Without it, consumer expenditure in Spain and France would have been much weaker and growth would have struggled to be positive in the fourth quarter of 2004," Carnell said.

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Five quarter-point hikes in British interest rates to 4.75 percent have helped cool the once-booming British market.

But comparatively cheap mortgage rates are expected to continue to stimulate house prices in the euro zone and Nordic countries, which have also seen strong house price growth.

In the euro zone the European Central Bank is expected to keep its key rate at 2 percent until around the end of the year while rates in Sweden, Norway and Denmark are very low too.

Although central bankers are becoming increasingly concerned that household borrowing could spiral out of control, worries about the strong euro and slower global growth are likely to have greater impact on monetary policy, some economists said.

Twelve economists said house prices would have more impact on monetary policy in future and 11 saw no change of influence.

"There's a risk once the economy gains traction, house price inflation accelerates even further. There are already signs credit growth is accelerating," said Elwin de Groot at Fortis Bank in Amsterdam.

Fifteen of 23 repondents said the ECB should not explicitly look at house prices when setting monetary policy.

One of the major risks of such a move is the lack of regular and reliable data, economists said. The same question could be raised for other asset prices such as equities, they said.

Of the 24 economists that answered the question, 18 said euro zone house price inflation was not adequately measured.

Despite this, only six economists said they would like Eurostat, the European official statistics agency, to include changes in house prices in its HICP inflationary measure, citing difficulty in the measurement of asset prices. Sixteen said no and four did not answer the question.