Global housing market downturn gathering pace

The world’s housing downturn is gathering momentum, according to the latest worldwide survey of house price indices prepared by the Global Property Guide.

During 2011, house prices fell in 22 countries

During 2011, house prices fell in 22 countries, of the 35 countries for which Q4 house price statistics are available, and rose in only 13 countries.

Similarly, 21 housing markets performed worse during 2011 than last year, while only 14 countries performed better.

The figures for the fourth quarter of 2011 are somewhat worrying, with quarterly price rises in only 10 countries, but price falls in 25 countries. On the other hand, the apparent trend towards recovery in the US is positive.

The slow pace of the global economic recovery, strengthening sovereign debt concerns, weak consumer confidence and high unemployment all continue to weigh on residential property markets.

The Global Property Guide’s statistical presentation uses price-changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents.

India and Brazil seem unstoppable, and remain the best performing housing markets in the world.

In 2011, house prices in Delhi soared 25.26 per cent, with a rise of 6.62 per cent during the latest quarter. Yet demand is still expected to pick up, because the Reserve Bank of India (RBI), in its Q3 review of Macroeconomic and Monetary Developments, signalled a pause in monetary policy tightening, in order to fuel economic growth.

The world’s second strongest house price rise occurred in Sao Paulo, Brazil, where house prices surged by 19.7 per cent in 2011. Good weather, relatively inexpensive cost of living and strong capital appreciation are some of the reasons why Brazil is seen as a good choice for property investment. During the fourth quarter, house prices rose by 3.93 per cent.

Most countries whose housing markets experienced accelerated downturns in 2011 are located in Europe, including Finland (-2.22 per cent down in 2011), UK (-3.39 per cent), Sweden (-5.29 per cent), Netherlands (-5.77 per cent), Slovak Republic (-6.88 per cent), Portugal (-7.78 per cent), Spain (-9.27 per cent), Athens, Greece (-10.43 per cent), and Warsaw, Poland (-10.55 per cent).

Unhappy Ireland still holds the title of ‘world’s weakest housing market’, with house prices plummeting by 18.08 per cent in 2011. With low transactions, constrained mortgage lending, and an uncertain economic environment, Irish house prices are likely to continue falling in 2012.

European countries which saw smaller house price falls this year than the previous year include Turkey (-1.73 per cent), Croatia (-3.26 per cent), Lithuania (-4.21 per cent) and Bulgaria (-8.99 per cent).

However, several European countries actually enjoyed house price rises in 2011. The highest house price climb in Europe was in Tallinn, Estonia, whose property market has been recovering since the second half of 2010. Over the past twelve months, house prices in Tallinn rose 8.36 per cent.

Other strong European housing markets in 2011 included Norway (+7.01 per cent) and Switzerland (+4.90 per cent).

Housing markets in the Ukraine and Iceland finally bounced back in the final quarter of 2011. In Kiev, apartment prices climbed by 5.29 per cent (in nominal terms) from a year earlier, after falling 9.47 per cent the previous year. Likewise, house prices in Iceland rose 1.84 per cent year-on-year, after falling 4.18 per cent the previous year.

In Germany and Latvia (Riga), housing markets had modest increases in 2011, with 1.53 per cent and 0.53 per cent rises, respectively.

Almost all Asian housing markets in the survey performed more poorly in 2011, than during the previous year.

House prices in Hong Kong were up 5.32 per cent on the year, after rising 18.87 per cent the previous year. House prices in Singapore rose a mere 0.28 per cent, after a rise of 13.06 per cent the previous year. In both Hong Kong and Singapore there were price-falls in the final quarter of 2011, as a result of cooling measures, coupled with the uncertainties in the global economy. Hong Kong house prices fell 5.24 per cent during the quarter, and Singapore house prices fell 0.67 per cent.

During 2011, house prices in Taiwan fell 8.74 per cent, after rising 9.70 per cent the previous year. China (Shanghai) and Japan (Tokyo) had lesser declines at 3.23 per cent and 3.69 per cent, respectively. Prices may continue to fall in the coming months, for at least as long as the tightening policies remain in place.

However, housing markets in South Korea and Indonesia (14 cities) improved from a year earlier with price rises of 2.94 per cent and 0.89 per cent, respectively.

During 2011, house prices in the US fell 5.54 per cent year-on-year, according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index. In the final quarter, house prices rose 0.06 per cent, the first quarterly rise over the past two years.

The Global Property Guide is an online property research house, which covers residential property market trends in over 100 countries.