House prices in trouble across the world in 2010
2010 has been a tricky year for house prices across the world.
It’s easy to concentrate on our own property market when it comes to house prices.
But it’s not just the UK that has seen its house price recovery hit the rocks in recent times. According to new research from Knight Frank, plenty of areas across the world are finding it pretty tough too. Indeed, Knight Frank have suggested it shows that the global house price recovery seen since the credit crunch truly hit may not have run out of steam.
So what’s the story, and what can we learn from the experiences of other nations?
The 10 worst performers
The latest Global House Price index from Knight Frank revealed that Q3 represented a tough few months for housing markets the world over. While annual house price growth stood at 3.1%, Europe was by far the weakest region, with growth of just 0.8%. And that flattered some nations, who had a shocking time of it. For example Hungary and Croatia, not that long ago touted as some of the best nations in which to invest in property for British investors, saw falls of nearly 3%.
However, the results of a single quarter rarely tell the whole story. Let’s take a look at the ten nations that have seen the biggest property price falls over the course of 2010.
|
Country |
Annual % change |
Six month % change |
Quarter % change |
|
Czech Republic |
-3.3% |
-0.9% |
-0.6% |
|
Japan |
-3.6% |
-1.6% |
-0.8% |
|
Spain |
-3.7% |
-1.8% |
-0.9% |
|
Bulgaria |
-6.0% |
-1.9% |
-1.2% |
|
Dubai, UAE |
-6.1% |
-10.1% |
-6.1% |
|
Croatia |
-9.5% |
-2.8% |
-2.8% |
|
Hungary |
-10.7% |
-2.7% |
-2.7% |
|
Ukraine |
-12.6% |
-7.0% |
-2.2% |
|
Lithuania |
-13.9% |
-3.7% |
-2.0% |
|
Ireland |
-14.8% |
-3.0% |
-1.3% |
It’s not exactly a huge surprise to see Ireland propping up the rest of the table, with house prices falling by a whopping 14.8% so far in 2010. Ireland’s economy has gone into freefall over the last year or so, with many problems that will sound eerily familiar to British readers – an overhyped property market and a bulging public sector, followed by sharp cuts from the Government.
Dubai also stands out on that list. Property prices in the tax haven have dropped by almost 60% since its peak in mid-2008, while the bank Standard Chartered has warned that it expects prices to fall a further 5% in 2011, with property prices bottoming out there in the next 18 to 24 months. The property problems in Dubai were quite different to those experienced in the UK and Ireland, with oversupply leading to price falls.
John Fitzsimons looks at what you should always do if you fancy buying a property overseas
The final nation worth noting on this list is Spain, for so long the top choice of Brits looking to emigrate for a bit of sun and sea. There have been issues with the property market in Spain for some time, which has led to significant drops in transaction numbers – home sales in October were down 17.7% year-on-year, at the lowest level on record, while boasting the highest level of unemployment in Europe (at 20%) isn’t exactly helping matters. The nation currently boasts 1.5 million empty homes, while global rating agency Fitch Ratings reckons it will be 2012 before the property market in Spain bottoms out, with prices falling 30% from their 2008 peak.
For reference it’s worth highlighting that Greece finished just outside of this top ten, with property price falls of 3.1% in the year to date.
The top performers
However, it’s not all doom and gloom. Some nations have enjoyed significant price increases over the past year. Below are the top 10 performers so far in 2010.
|
Country |
Annual % change |
Six month % change |
Quarter % change |
|
Latvia |
26.1% |
7.3% |
2.0% |
|
Hong Kong |
21.3% |
9.1% |
2.4% |
|
China* |
21.1% |
1.5% |
-0.3% |
|
Singapore |
20.0% |
6.7% |
1.6% |
|
Israel |
16.4% |
6.1% |
4.4% |
|
India |
15.4% |
6.9% |
7.4% |
|
Australia |
11.5% |
2.2% |
0.1% |
|
Austria |
9.9% |
4.9% |
3.7% |
|
France |
8.6% |
6.8% |
4.2% |
|
Poland |
8.1% |
8.3% |
1.1% |
*Based on Beijing and Shanghai
So, some surprising names on that list, particularly Latvia, whose housing market might politely be described as turbulent. In Q3 of 2009 Latvia was actually in last place of this table, having seen property prices slump by 70% since their 2007 peak. The market has improved due to a range of factors, including Government cuts which have boosted industrial performance and relaxed immigration laws, making things a bit easier for foreign investors.
Related blog post
- John Fitzsimons writes:
Should you buy in the UK or overseas?
If you're looking to invest in property, are you best off putting that money into a British property or buying abroad?
Read this post
However, it’s the Asia-Pacific region which has really enjoyed a strong 2010 thus far, with three of the top four spots and average price growth of 9.9% across the region.
However, the authorities there are attempting to cool the housing markets. In China for example, the government is focusing on increasing the amount of affordable housing available, with plans to support developers of cheap property.
Meanwhile in Hong Kong, the government has turned to additional stamp duty on properties sold within two years of purchase and larger down payment requirements for those properties at the higher end of the scale. This followed warnings from the International Monetary Fund that the Hong Kong property market was enjoying an “irrational upswing”!
And in Singapore, the government has released more land and insisted that banks demand more cash up front for property transactions, with the promise of more action should prices continue to rise.
Let’s just hope that the next time the UK experiences a sharp house price bubble, our own government at the time will be a little more hands on in managing it.
More: Bankrupts discouraged from work | Avoid paying interest until 2012
Most Recent
Comments
-
Mollymouse is right - for investors with good cash deposits, the rental market is getting better and better, as rents finally start to rise and recover to a sensible rate of return. But why restrict investors from owning multiple houses? No-one has a god-given right to own a house, and if they can't afford it in competition with others in teh market, that's just tough. And if you place restrictions on individuals, people will just create limited companies instead and run their buy-to-let investments through those instead. What's so wrong with first time buyers being frozen out by investors? Anyone who pays rent is getting a much cheaper deal with less risk than they would face if they owned a house and were responsible for paying off the mortgage, covering all the interest and maintenance costs and so on. Young people should be *grateful* to BTL landlords and councils for providing them with cheapn rental housing. It makes perfect sense for young people to rent when they have so little money, and there's nothing wrong with renting long-term, as they do in many parts of the European continent, and as do council tenants - who have the most perfect sweet deal imaginable with their heavily subsidised rents and lifetime tenancies, which distort the market appallingly. The only reason private residential property has been a "good deal" for decades is because homeowners get a free ride on capital gains tax and not enough houses are being built. If we returned to taxing house price rises as we used to do before 1965, young people would quickly lose their obsession with owning their own home because they'd see that owning property is a duff asset once it's taxed like other investments. The notion that property "must" be worth three times average salaries is just ludicrous - there are so many factors involved and if property were taxed property, that 3 x multiple quickly ebbs into history, a temporary aberration. People bleat on about "houses should be homes, not investments", and that's fine - but it applies to long-term renting as well as ownership.
REPORT This comment has been reported. -
[url=http://www.ipinglobal.com/ipin-live/blog/348832/housing-humbug-and-property-investment-predictions-for-2011]European property is still likely to have a fairly tough time next year[/url], the correction is needed. Unfortunately it's inflation that is unlikely to let it happen. With respect to the Spanish "land grab by developers" comment, I think you will find it is actually local government that "grabs" the land, not the developers, and even then, this is only in some parts of Spain. With respect to China, using only 2 cities of statistics is hardly setting a good benchmark for an assessment! Aside from that, the main reason for the gains there are down to why the Chinese buy property (as a store of wealth) not, like the west, as a form of speculation. Empty, non-revenue generating, brand new property is regarded as an asset in China. On the whole, the UK market will likely become more separated, with people needing more localised statistics to judge costs and values - a notional average just doesn't represent accurately what anything is worth.
REPORT This comment has been reported. -
Bimber is dead right. Brown thought that his policies were wonderful but the economy was been driven by a credit -fuelled mania feeding increasing house prices. Helped by 125% mortages which were sold by commission led 'brokers'. I feel it is time we went back to 1950s house buying policies, save up a decent deposit first and be able to afford you house. House prices should not increase any more than general inflation.
REPORT This comment has been reported.
Do you want to comment on this article? You need to be signed in for this feature
23 December 2010