Global House Prices: Where’s Hot and Where’s Not

Global House Prices: Where’s Hot and Where’s Not

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queens-world-fair-globe | credit:rikomatic

The latest Knight Frank Global House Price Index 2008 has just been released, revealing some interesting and alarming facts. While the West continues to crumble, new markets have emerged and grow stronger by the minute. The global real estate doom has caused a massive drop in real estate property values from Japan to Ireland and put many investors into a tight corner.

As the report from Knight Frank shows, it isn’t all doom and gloom though. Some new markets are peeking through the clouds giving us hope for a chance to find little pockets of gold that will further property investors portfolios.

By far the most impressive markets were Hong Kong with an annualised growth of 22.3% and Singapore 31.3%. Another market that has held its own is China, which shines through with some strong city markets that have risen by 20% in the last one year.

But the winner that tops it all is Bulgaria, which has managed to have an annualised price growth of 33.7%, while former glory Latvia bombed to -7.1% losing 25 positions over last years report. The third Baltic country Estonia that was a strong leader last year has also bitten the dust with a loss of -14.5%. These negative facts were mainly made possible by uncertain job markets, the rise of interest rates and debts of household owners.

To get a good overview of the strong and weaker markets take a look at the following table. Below we will cover the individual markets a little closer, giving you some insights into local economies and why it is or isn’t good to invest.

Location

2007 Q1

2008 Q1

2007 Q1 Rank

2008 Q1 Rank

Position change from 2007 Q1 index

Position change from 2007 Q4 index

Bulgaria

22.6%

31.5%

2

1

1

0

Singapore

13.5%

29.9%

7

2

5

0

Hong Kong

2.7%

28.8%

25

3

22

2

Jersey

4.5%

28.0%

22

4

18

n/a

Russia

#N/A

21.7%

#N/A

5

#N/A

-2

Iceland

9.7%

19.1%

11

6

5

0

Australia

8.6%

13.8%

12

7

5

2

China

5.5%

11.7%

19

8

11

4

Sweden

-0.3%

9.1%

31

9

22

2

South Africa

13.6%

8.8%

6

10

-4

-2

Croatia

0.0%

7.1%

28

11

17

-1

Canada

12.6%

6.1%

8

12

-4

-5

Indonesia

5.5%

6.1%

18

13

5

5

Netherlands

8.0%

4.5%

13

14

-1

11

Norway

16.4%

3.8%

5

15

-10

-2

Spain

7.2%

3.8%

16

16

0

1

Portugal

1.2%

3.8%

27

17

10

5

Finland

5.2%

3.6%

20

18

2

-3

Poland

0.0%

3.0%

28

19

9

-15

France

7.7%

2.5%

14

20

-6

-1

New Zealand

12.4%

2.1%

9

21

-12

-7

Hungary

3.8%

1.2%

24

22

2

2

Austria

6.1%

1.2%

17

23

-6

-3

UK

11.2%

1.1%

10

24

-14

-8

Lithuania (Vilnius)

21.7%

0.5%

3

25

-22

1

Switzerland

2.5%

0.4%

26

26

0

-5

US

4.7%

0.0%

21

27

-6

1

Israel

-5.0%

-0.2%

34

28

6

-5

Denmark

4.1%

-0.7%

23

29

-6

-2

Japan

-1.5%

-0.7%

33

30

3

n/a

Germany

-1.5%

-5.2%

32

31

1

-2

Ireland

7.6%

-8.8%

15

32

-17

-1

Estonia (Tallinn)

21.4%

-10.7%

4

33

-29

-1

Latvia (Riga)1

61.2%

-20.0%

1

34

-33

-4

Europe

Bulgaria is definitely the strong performer within Europe with average prices of flats rising by about 34% within the last year. Despite the growth, the prices in Eastern and Central Europe still remain relatively low in comparison to Western Europe which makes them even more attractive for overseas investors. For a first time inclusion into the Knight Frank Global House Price Index we see Russia emerging a strong contender with growth up to 30% over the last year. Despite some irregularities within the country some regions are mighty powerful, like the city of St Petersburg who had a growth of 75% on new flats. Meanwhile Moscow was a little slower with 21.1%.

Poland also managed to sneak into the list with a great start at the beginning of last year with 22% growth that fell somewhat toward the end of year to 7% and 2.3% within the last two quarters. Iceland however surprised most with some 19% growth in Reykjavik in 2007. Interestingly enough, Iceland has also continued to perform strong toward the end of year when other European markets started to crumble, despite the high 13% interest rate. Croatia has also seen good growth in 2007.

Scandinavia however is perhaps the strongest remaining pocket of housing values in the remaining European countries. Sweden powers on in Stockholm especially with a growth of 10.6%, while the Finns are adding value to the houses around the commuting distances of Helsinki with 5.3%.

The UK saw the biggest slump of price growth since 2005 toward the end of the year. Surprisingly Northern Ireland remained reasonably strong with 24% while the regions of Humber and Yorkshire managed a measly 3%.

The rest of the countries in Europe have more and less seen a slow down or total turn around in their price index. France, Spain, Germany and Ireland are all facing tougher times with some notable losses over the course of last year.

Far East

In the Far East, Singapore and Hong Kong were both very strong performers in 2007. With a very strong apartment market in Singapore and price rises up to 31%, Hong Kong had an overall stable performance with 24% especially in the last quarter throughout all property markets.

China with the upcoming Olympic games that are starting on the 08.08.08, have seen a huge building boom and interest from overseas developers that was somewhat slowed down by the Chinese government toward the end of year. This resulted in a price fall in Beijing itself during December 2007 but hasn’t bothered to affect the city of Urumqui were the strongest inflation of growth was seen with near 25%.

South Africa

Even though South Africa hasn’t performed too bad in comparison with other world wide markets, their yearly price index was still somewhat disappointing, in fact it was the worst over the period since 1999 with 12.3%. This slowdown in the market has partially been blamed on the introduction of the National Credit Act on June 1st 2007 which has affected lending criteria.

United States Of America

The US markets still remain troubled with losses across the country, effecting global economies and home owners alike. The biggest losers were California (-6.6%), Florida (-4.7%), Michigan (-4.3%) and Nevada (-5.9%). But despite a lot of negative, there were some pockets that actually managed to grow (Wyoming, Utah, North Dakota, Alaska and Montana).

What’s interesting here is the fact that all the more rural markets seem to thrive, while the more populated and “trendy” markets seem no longer so. Back to nature might soon become a lifestyle statement in the US, if the markets continue to tumble as they did.

Canada & Australia

Australia has powered ahead over the course of last year with especially strong markets in the cities of Brisbane and Adelaide. Both of these cities grew by 20%. Both Canada and Australia have managed to keep growing due to the demand of raw materials from raising industries such as China and India.