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.
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.