Global Real Estate Prices Record First Rise In Two Years
Tuesday, June 22, 2010
Global real estate prices increased in more than half of the locations monitored
by the Knight Frank Global House Price Index in the year to the end of March
2010, the first net increase since 2008.
According to the report, the Asia Pacific region saw the strongest growth with
prices increasing, on average, by 17.8%.
Annual price inflation for all global housing markets moved into positive territory
for the first time since the fourth quarter of 2008, recording 1.6% growth in
the year to March 2010.
The top performers remain the Asian economies of China, Hong Kong and Singapore,
all recording annual growth in excess of 24%.
Ukraine and the three Baltic States continue to occupy the bottom rankings
with annual price falls of more than 30%.
Liam Bailey, head of residential research, Knight Frank, commented:
“Arguably, the most noticeable trend in global house prices is the ease
with which the performance of global housing markets can now be grouped by world
region. The top four positions in our rankings are all occupied by Asia Pacific
locations, whilst Europe dominates the bottom half of the table."
“A recovery in the global housing market is undoubtedly under way, in
Q1 2009 33% of countries recorded positive annual growth, in Q1 2010 this figure
is closer to 53% but still some way off the figure of 90% recorded in Q1 2006."
“Analysis of the quarterly growth results suggests the markets in some
of the worst performing markets such as the Baltic states and Ukraine are starting
to experience some respite, with prices falling at a slower rate than previously.
Estonia experienced a 40% fall in prices annually but only a 0.5% fall during
the first three months of this year."
“Prices in Hong Kong increased by 30.6% in the year to March 2010, however,
we expect results for the coming months will show more muted levels of growth
as the government’s efforts to rein in the overheated market take effect.
These include measures to increase land supply, a maximum 60% loan-to-value
restriction on mortgages for luxury homes and developers are now required to
release at least 30% of units in their first phase to halt the slow release
of homes which allows prices to inflate over the course of the development."
“In Australia, prices rose 20% in the year to March 2010, according to
the Australian Bureau of Statistics (ABS). However, in our opinion the results
from ABS overstate the actual underlying price growth due to its unique methodology
and seasonal shifts in market activity, partly as a result of the increase in
first time buyer demand over the past year which has been driven by government
incentives."
“Historically, the index has overshot on both the downside and in this
case the upside – other private house price measures, which have a more
wide reaching methodology, taking into account apartments and semi-detached
housing (unlike the ABS), have recorded growth of around 12% in the year to
March 2010. This still significant growth has been driven by a confluence of
factors; 40-year low interest rates, first time buyer concessions, strong population
growth and a lagging supply response. With interest rates now rising, the government
withdrawing stimulus and the supply response picking up (albeit modestly), we
expect house price growth to slow over the next six to nine months."
“Doubts over the Australian Index’s methodology are mirrored in
Spain where, according to its Housing Ministry, prices fell by 4.7% in the year
to March 2010. Most serious commentators however believe price falls of 10-20%
over this period provide a more accurate reflection of Spain’s housing
market performance given its backdrop; 20% unemployment, a shrinking economy
and rising debt."
“In Europe a positive story has been provided by the Scandinavian countries
of Norway, Sweden and Finland. Here, annual growth has hit double digits as
housing markets, less beset by currency weakness and debt crisis than many of
their European neighbours, has allowed supply shortages to fuel growth once
more."
“Generally, however, the Q1 2010 results suggest that whilst global housing
markets remain polarized, each quarter provides new evidence that the global
recovery is gaining ground as the proportion of countries moving into positive
territory increases. It remains to be seen whether this is another period of
sustained growth or the middle peak in a double dip recession. Certainly, a
number of European economies face growing challenges in the form of tightening
fiscal policy and austerity measures.”
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