Latvia is lead­ing the world, while sunny Spain is over­cast

Yorkshire Post - Property - - PROPERTY - Sharon Dale

AV­ER­AGE an­nual global house price growth stood at 3.1%in the third quar­ter of 2010, ac­cord­ing to the Knight Frank Global In­dex.

But there are a num­ber of win­ners and losers. The strong­est world re­gion was Asia-Pa­cific with av­er­age growth of 9.9%, and the weak­est was Europe at 0.8%. There is a grow­ing gap be­tween the less debt-af­flicted Euro­pean economies of Aus­tria, France and Fin­land and their neigh­bours to the south and west of the con­ti­nent, with Greece, Spain and Ire­land, who are all strug­gling.

Liam Bai­ley, head of res­i­den­tial re­search, Knight Frank, says: “There is a pos­i­tive story to take from the lat­est re­sults of the Knight Frank Global House Price In­dex. For the first time since late 2008 prices are ris­ing in each of our six world re­gions (Asia-Pa­cific 9.9%, Mid­dle East 5.1%, North Amer­ica 4.2%, South Amer­ica 3.5%, Africa 3.0% and Europe 0.8%).

“At the same time prices are ris­ing in 67% of the 48 coun­tries we have re­ported on this quar­ter, on an an­nual ba­sis.

“Un­for­tu­nately these up­beat head­lines do not tell the full story. Dig­ging into the data, we can see that there are still con­sid­er­able is­sues play­ing out across the global mar­kets. While a ma­jor­ity of coun­tries are re­port­ing pos­i­tive an­nual growth, 56% saw prices fall in Q3 this year.

“There is grow­ing ev­i­dence that the global hous­ing mar­ket re­cov­ery, which be­gan in early 2009 fol­low­ing the des­per­ate con­di­tions in 2007 and 2008, may just be be­gin­ning to run out of steam. Nearly 30% of coun­tries which had ex­pe­ri­enced strength­en­ing con­di­tions in 2010 saw quar­terly price growth turn neg­a­tive in Q3 2010. Led by Euro­pean mar­kets the list in­cludes: Greece, Ice­land, Nether­lands, Nor­way, Por­tu­gal, Slove­nia and the UK. Out­side of Europe the list also ex­tends to cover: China, Canada, Columbia, Dubai, New Zealand, South Africa and Tai­wan.

“The av­er­age per­for­mance of the Euro­pean economies has im­proved but the pic­ture re­ported for in­di­vid­ual Euro­pean coun­tries varies dra­mat­i­cally, with an­nual growth rang­ing from 26.1% in Latvia to -13.9% in Lithua­nia and -14.8% in Ire­land.

“The per­for­mance of Latvia’s hous­ing mar­ket in re­cent years has proved ex­tremely volatile. In Q3 2009 Latvia was ranked at the bot­tom of our In­dex with house prices hav­ing fallen by 70% since the mid-2007 peak. Now Latvia leads our ta­ble. Fol­low­ing a com­bi­na­tion of tax rises and aus­ter­ity mea­sures such as bud­get and wage cuts, in­dus­trial pro­duc­tion has picked up with GDP reach­ing 2.7%. in Q3 2010.

“Res­i­den­tial de­mand has been fur­ther boosted by a new Lat­vian im­mi­gra­tion law which came into force on 1 July, re­lax­ing res­i­dency rules for for­eign in­vestors.

“Par­al­lels have been drawn be­tween Latvia and Ire­land – in both cases the re­ces­sion was borne out of a con­sumer­driven boom and bust and both gov­ern­ments have im­posed strict fis­cal tight­en­ing mea­sures.

@In ad­di­tion, nei­ther coun­try has been able to use its ex­ports or de­value its cur­rency to min­imise the fall­out from its eco­nomic turmoil. In Latvia house prices have started to climb again since Q3 2009. House prices in Ire­land, by com­par­i­son, are still fol­low­ing a down­ward trend with price falls of 36% recorded to date, with de­clines of up to 50% recorded in Dublin. How­ever, the lat­est re­sults show the rate of de­cline is slow­ing with prices fall­ing by 1.3% in the third quar­ter com­pared to 1.7% in the pre­vi­ous quar­ter.

“In the US an­nual price in­fla­tion has fallen back to 0.6% com­pared to 4.2% in Q2 2010; av­er­age prices in the US now stand at their mid2003 level.

While the weak­en­ing of growth in Q3 is partly due to the end of the govern­ment’s tax in­cen­tive for first-time buy­ers, the ad­di­tional is­sue of high sup­ply vol­umes, much of it hid­den due to pend­ing fore­clo­sures, is con­tin­u­ing to blight the hous­ing mar­ket. “Ef­forts to cool the Asian hous­ing mar­kets ap­pear to be tak­ing ef­fect with more muted growth.”

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