Jit­ters over dou­ble dip re­ces­sion hit prices round globe

Hong Kong is hot and Ire­land is ice cold, ac­cord­ing to Knight Frank’s lat­est global house price in­dex. Sharon Dale re­ports on the state of the hous­ing mar­ket around the world.

Yorkshire Post - Property - - PROPERTY -

GLOBAL house prices rose by 2.8 per cent in the year to De­cem­ber 2010, ac­cord­ing to the lat­est data from the Knight Frank Global House Price In­dex

Price growth was led by Asi­aPa­cific with 7.5 per cent an­nual growth, the Mid­dle East with 5.3 per cent and South Amer­ica, which saw a rise of 3.8 per cent.

The weak­est re­gion was North Amer­ica, which saw no change in val­ues. The fastest ris­ing coun­tries were Hong Kong, where house prices rock­eted by 20.1 per cent. The Econ­o­mist re­cently re­vealed that prices here are over­val­ued by 54 per cent and the gov­ern­ment is fight­ing to pull spec­u­la­tive price growth un­der con­trol.

Latvia is the sec­ond best per­former with rises of 16.9 per cent, which re­veals a bounce back from a 70 per cent fall in prices dur­ing the credit crunch. Is­rael is third in the in­dex with a 16.2 per cent rise thanks to con­sid­er­able in­ward in­vest­ment from over­seas in­vestors

Liam Bai­ley, head of res­i­den­tial re­search at Knight Frank, says: “Our main head­line con­firms rel­a­tively be­nign con­di­tions – with av­er­age an­nual price growth across the world at a mod­est 2.8 per cent.

“Of course this head­line hides big re­gional and coun­try level dif­fer­ences, but more con­cern­ing is the fact that this an­nual fig­ure hides the fact that a grow­ing num­ber of coun­tries are see­ing neg­a­tive quar­terly price move­ments.

“In Q2 2010 the pro­por­tion of coun­tries in our in­dex record­ing neg­a­tive quar­terly growth was less than a third at 31 per cent, in Q3 the fig­ure was 35 per cent, in our most re­cent Q4 fig­ures the pro­por­tion is 41 per cent.

“Across an in­creas­ing num­ber of Euro­pean coun­tries and also in the US mar­kets were weaker in the sec­ond half of 2010, fol­low­ing a brief re­vival in the pre­vi­ous 12 months.

“This trend is be­ing re­in­forced by weaker re­sults from Asia-Pa­cific, with In­dia, Tai­wan and Ja­pan all record­ing neg­a­tive price growth in the sec­ond half of 2010.

“The key trend at play in the global mar­ket is the un­wind­ing of the stim­u­lus pack­ages put for­ward in 2009 in Europe, North Amer­ica and Asia-Pa­cific.

“The im­pact of ‘hot money’ cre­ated by quan­ti­ta­tive eas­ing may be dis­si­pat­ing, es­pe­cially in Asia – where the 30 per cent, 40 per cent, 50 per cent and even higher an­nual rates of growth, which were com­mon in some Chinese and In­dian cities a year ago, have now cooled con­sid­er­ably.

“In Europe and the US, by con­trast, the last ves­tige of the stim­u­lus, namely ul­tra-low in­ter­est rates are re­garded as crit­i­cal to the on­go­ing se­cu­rity of the mar­ket. As an ex­am­ple, dis­cus­sions sur­round­ing an im­pend­ing rise in the UK rate from 0.5 per cent to 0.75 per cent are enough to cause panic among hous­ing mar­ket com­men­ta­tors.

“It looks in­creas­ingly likely that Asian mar­kets will es­cape a crash in prices, but in many of the pre­vi­ously ‘hot mar­kets’ price falls later this year seems a re­al­is­tic as­sump­tion. Across Europe and the US the lack of bank lend­ing is likely to ex­tend the re­cent pe­riod of price re­ver­sals.”

New data re­leased this week shows that US sin­gle-fam­ily home prices fell for the sev­enth month in a row in Jan­uary. Sea­son­ally ad­justed prices fell in 12 of the 20 metropoli­tan ar­eas tracked by the S&P/Case-Shiller in­dex. In four cities, prices were at their low­est in 11 years, with the over­all in­dex down 0.2 per cent in Jan­uary from the pre­vi­ous month. The av­er­age an­nual price fall across the 20 cities was 3.1 per cent; only Wash­ing­ton DC saw a mean­ing­ful rise in prices. House prices in the US cap­i­tal city, which in gen­eral has fared bet­ter than the rest of the coun­try dur­ing re­cent eco­nomic down­turn, gained 3.6 per cent over the year.

S&P’s David Blitzer says: “The hous­ing mar­ket re­ces­sion is not yet over, and none of the sta­tis­tics are in­di­cat­ing any form of sus­tained re­cov­ery. At most, we have seen all sta­tis­tics bounce along their troughs; at worst, the feared dou­ble-dip re­ces­sion may be ma­te­ri­al­is­ing.”

Liam Bai­ley is also pes­simistic for the short-term prospects and says: “In sum­mary, out­side of the lux­ury mar­kets in the global city hubs, it is dif­fi­cult to see what could bring about a rapid im­prove­ment in the hous­ing mar­kets of the de­vel­oped economies.” Hong Kong 20.1 per cent Latvia 16.9 per cent Is­rael 16.2 per cent China (Based on Bei­jing & Shang­hai) 15.3 per cent Sin­ga­pore 14.0 per cent Aus­tria 9.9 per cent France 9.5 per cent In­dia 8.9 per cent Poland 8.1 per cent Den­mark 7.8 per cent

HOME SER­VICE: Debs Cole has de­signed and pro­ject man­aged the ren­o­va­tion and ex­ten­sion of a farm­house to cre­ate a lux­u­ri­ous thatched coun­try home, which is now on sale as she and her hus­band David down­size.

HONG KONG: House prices re­flect its sta­tus as a hot spot, but ex­perts say prop­erty there is over val­ued.

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