Global slowdown to be followed by gradual recovery of house prices
The ups and downs of the global property market paint a mixed picture, but hope is on the horizon for 2012. Sharon Dale reports.
GLOBAL house prices increased by 1.8 per cent in the year to March, the lowest annual rate of growth recorded since the last quarter of 2009, according to the latest results from the Knight Frank Global House Price Index.
House prices in 25 of the 50 countries included in the index remained flat or saw negative growth in the first three months of 2011, compared with only 18 countries a year earlier.
Asia was the top-performing continent, recording 8.4 per cent growth over the past 12 months. However, this was down from 17.8 per cent a year earlier. The weakest region was North America, which saw a fall of 0.4 per cent in values in the year to quarter one 2011.
House prices in Europe were static for the first three months of the year, though the UK saw a one per cent increase. This represents an improvement on a year ago when European house prices had fallen 4.1 per cent over the previous year.
The strongest performing countries are Hong Kong, which recorded a 24.2 per cent annual rise in prices, and where the government is fighting to get inflationary pressures under control, India, which saw a 21.9 per cent growth, and Taiwan, with 14.3 per cent.
Liam Bailey, head of residential research at Knight Frank, says: “Price growth, while not stalling, has faltered in quarter one of 2011, pointing to ongoing problems underlying the world’s housing markets. In quarter four of 2010, overall annual price growth stood at 3.3 per cent. Three months later, this shrank to 1.8 per cent.
“A cursory glance at the results table would suggest it’s business as normal, with Asian countries firmly planted at the top of the table and both Europe and North America languishing behind. But there are a few less predictable results.
“House prices in Russia, for example, fell 13.7 per cent in the first three months of this year positioning it below Ireland in the rankings.
“On the other hand, France has jumped to sixth place in the rankings, up from 30th a year earlier. Sweden and Germany, by comparison, have experienced several quarters of positive growth only to fall back in quarter one 2011.
“In most of these cases, with the notable exception of Germany, the housing market is reflecting the wider economy’s performance as well as responding to domestic policy decisions.
“In Russia, the government’s mass affordable housing programme is boosting supply and lowering the average price throughout the country, despite the average price growing in Moscow and St Petersburg.
“House prices in France look to be mirroring the country’s improving economic scenario and greater productivity is boosting wages, consumer spending is up and, likewise, property demand.
“Globally, the slowdown in annual price growth to 1.8 per cent is largely attributable to the poor performance in the first three months of this year. In quarter one 2011, 50 per cent of countries saw flat or negative growth, a year earlier this applied to only 38 per cent of countries included within the index.
“The efforts on the part of Asian governments to cool house price inflation in the past year have been largely successful, although the latest figures suggest Hong Kong’s housing market is proving less responsive.
“In quarter one 2010, annual inflation stood at 30.4 per cent; this fell to 25 per cent in quarter two 2010 and 22.1 per cent in quarter four 2010, but has now rebounded to 24.2 per cent. Demand from mainland China is a key driver – accounting for nearly one in four Hong Kong property purchases. The Chinese market by comparison has seen annual price growth fall from 49 per cent in quarter one 2010, to a more sustainable 8.4 per cent.
“Additional measures are being adopted by the Hong Kong government to curb inflation by launching a new mortgage database. Banks may refuse mortgage applications, lower loan-to-value ratios or offer higher mortgage rates if applicants do overshadowed by Ireland’s 4.5 per cent decline over the same period. Interestingly, Greece and Portugal are showing signs of improvement.
“The Middle East provides an improving picture. Dubai has seen price growth regain positive territory in the last six months.
“In summary, we expect to see the current slowdown in global housing markets to continue, hitting a low point in quarter four 2011, assuming the Asian markets continue to cool.”
HIGH LIFE: Overheated? Hong Kong has seen the largest annual house price growth.