Economic uncertainty giving emerging property markets the edge
Global house price inflation slowed to an annual rate of 8.2% in Q4 2007, compared to 9.7% in Q4 2006, according to Knight Frank’s latest Global House Price Index.
Bulgaria tops the index as the country with the greatest annualised price growth (33.7%) while Latvia fell by 25 places having recorded negative year on year growth of -7.1%, two places ahead of Estonia which suffered price falls of -14.5% during 2007.
In the Far East, Singapore with annualised growth of 31.3% and Hong Kong at 22.3% both outperformed the market, as did China which has seen prices in some cities rise by over 20%.
Liam Bailey, head of residential research at Knight Frank says: “The Knight Frank Global House Price Index shows that while property prices in Europe and America appear to be suffering from the downturn in economic conditions; prices in Asia and elsewhere, notably Singapore and Hong Kong, are performing very well.
“The most outstanding feature in this index in Europe is Bulgaria’s continued strong showing against the astonishing reversal of fortune witnessed in the three Baltic countries. Two of the three; Latvia and Estonia, suffered negative growth (-7.1% and -14.5% respectively) and the third, Lithuania managed price growth of just under 1%. A year ago each were high flyers in our index with 66.6%, 23.8% and 23% annualised growth rates respectively. Uncertain employment conditions, rising interest rates and household indebtedness are all identified as contributory factors in this turnaround.”
Russia has been included in the Knight Frank Global House Price Index for the first time. Average price growth in the country last year was 30% but new build flats in St Petersburg rose by over 75%, while the average growth across the city was almost 50%. Moscow saw slower rates of growth, with an annual average growth rate of 27%.
The surprise performer in Europe was Iceland. Prices in the Reykjavík region rose by almost 19% during 2007. Price growth picked up towards the end of the year at a time when many countries across Europe were seeing the rate of house price inflation slowing. This has occurred despite interest rates of over 13%, although the latest movements in interest rates have been downward.
Croatia has also seen strong growth during the last year. The annual rate of almost 12% growth appears to resemble something of a return to form for Croatia, after rates of house price inflation dipped to below 6% towards the end of 2005. The highest values per square metre for residential property are found in apartments in the capital Zagreb. The value of property on the Croatian coast is around 90% of that in the capital.
In the remaining European countries, the strong performers are all Scandinavian. Sweden(with 10.6% growth) has seen the strongest growth in Stockholm and the surrounding area, where residential property prices increased by around 15% during 2007. Growth in Norwaywas slightly lower over the year, at just under 8%, and Finland saw growth of 5%.
The strongest growth in Finland has been seen in the regions within commuting distance of Helsinki and thanks to rail network improvements locations such as Kanta-Häme, have seen price increases of over 12%.
Conversely, although statistics on price growth for Denmark have not yet been made available, indications are that the market has slowed considerably and that some areas have seen falls in price growth, mainly as a result of the new bridge between Copenhagen and Malmo, which has resulted in many Danes moving to Sweden where property is cheaper and commuting to the Danish capital in less than 30 minutes.
With the exception of Bulgaria and Iceland, it is largely locations outside of Europe that have driven global property price inflation during 2007. Singapore prices rose steadily through the course of the year to show a 31% increase on prices of December 2006. Likewise Hong Kong, where property prices for all types of property rose by 24% in 2007, with almost half of that growth occurring in the last quarter alone.
In China, house prices in 70 cities rose 10.5% over the 12 months to December 2007. The fastest growth has occurred in the city of Urumqi, where price inflation was just under 25%. Data for December has revealed that prices in Beijing fell during the final month of the year, as a series of regulatory policies aimed at cooling speculative investment in the city’s housing market were introduced, including a tightening of rules for residents buying second homes.
The US market remains troubled. House prices in the US have continued to decrease, and the pace of decline appears to be increasing. Prices nationally have fallen 0.3% over the last year as the -1.3% quarterly decline in the last three months of 2007 negated slight gains earlier in the year. However, not all areas of the US have seen prices fall over the course of the year. Utah, Wyoming, North Dakota, Montana and Alaska all saw price inflation of over 6%, with Utah achieving 9.3% to Q4 2007. The greatest declines in residential property prices were observed in California, where prices fell by 6.6%, Nevada (5.9%), Florida (4.7%) and Michigan (4.3%).
Canada and Australia have both seen year on year residential real estate price inflation rise from around 8% in the previous year to 15% and 12% respectively in 2007. Both economies have been buoyed by demand for raw materials originating from rapidly industrialising economies such as China and India. The fastest growth in Australia has occurred in Brisbane and Adelaide, both of which have seen price growth of over 20%. Conspicuous by its poor price inflation performance relative to the rest of Australia is Perth, where annual growth over the course of the year was just 1%, possibly a reaction to the 37% growth that occurred in 2006. Growth in Sydney was 8% during 2007. |
