How house prices have changed around the world

If you think that the UK housing market was bad this year, then look at how house prices soared and crashed in other countries!

As I'm sure you're aware, the UK enjoyed an extraordinary property boom between 1995 and 2007. Indeed, house prices rose 12 years in a row, as the following table shows:

Source: Halifax House Price Index

Of course, we all know what happened next. Having peaked in August 2007, prices began to slide before bottoming out in the middle of this year. Indeed, they fell in 19 of the 22 months from September 2007 to June 2009.

Recently, house prices have bounced back, rising for five months in a row. In fact, the average house price at the end of November was £167,664, up 4.2% on the £160,861 recorded by the Halifax in December 2008. So, prices rose in 2007, fell steeply in 2008, and then recovered in 2009.

Boom, bust and bounce

As you might have expected, other property markets around the world have followed a similar boom-bust-bounce pattern to that experienced in the UK. As property prices started to rise strongly and interest rates tumbled around the world (particularly after the 9/11 attacks), vast numbers of home buyers and investors armed with cheap mortgages rushed to snap up property.

Indeed, the increase in property wealth during this period may well have been the biggest asset bubble ever seen in world history. Of course, once the credit crunch hit in 2007, panic set in and investors discovered that 'easy credit' quickly becomes 'tough debt'. A global recession also took away investors' appetite for risk, causing widespread falls in asset prices, including property values.

Worldwide house-price changes (Q3 2007 to Q3 2009)

That said, let's see how property owners and investors have fared around the world during this recent period of turmoil. My table is sorted by gain over the past two years; yearly falls are in bold type. Note that these are nominal price changes, which means that they haven't been adjusted for inflation (the rising cost of living), which varies widely from country to country:

Source: www.globalpropertyguide.com

Year one (second column)

As you can see, most worldwide property indices were up in the year to the end of September 2008. Of the 30 indices listed in the second column, 21 rose in our first year.

Two favourites with British investors top the table: Dubai (United Arab Emirates; up a staggering 80%) and Bulgaria (up nearly 27%). However, what reaches for the sky often comes crashing back to earth. A year later, Dubai prices had crashed by almost half (down 47%) and Bulgarian prices had dived by more than a quarter (28%)!

Elsewhere, the big losers in our second column were the US (Case-Shiller index down 16.5%), the UK (Nationwide BS index down 10.3% and Ireland (down 10%). Each of these countries was heavily supported by a FIRE economy (finance, insurance and real estate), hence the big drops during the credit crunch.

Year two (second column)

In the year to the end of September 2009, most of the above countries had experienced a drop in property prices. Indeed, in some vastly inflated bubble markets, there were staggering drops: over 59% in Latvia (Riga), 47% in Dubai (UAE), 24% in the Ukraine (Kiev) and 28% in Bulgaria.

At the other end of the scale, the notable winners in our second year were Israel (up nearly 14%) and Australia (up more than 6% across eight cities). However, of the 31 property indices listed above, no fewer than 20 fell in the year to 30 September 2009. What goes up must come down, as they say.

Two years (fourth column)

Finally, let's look at the combined impact of these ups and downs over the past two years (the final column). (Remember that we had 21/30 ups in column two and 20/31 downs in column three.)

Overall, the winners over two years have been China (Shanghai; up over 27%), Hong Kong (HKU; up almost 25%), Hong Kong (RVD; up almost 22%) and Israel (up nearly 16%). The big losers were the US (Case-Shiller; down 24%), Ireland (down nearly 22%), the Ukraine (Kiev; down nearly 19%) and the UK (Nationwide BS; down 13%).

So, over the past two years, the wooden spoon goes (unsurprisingly) to the United States, with property prices falling by almost a quarter: 24% in 24 months. Now that's what I call a proper crash!

Many thanks to www.globalpropertyguide.com for allowing me to use these data.

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