Helena Izotova
In 2010, a couple of years after the U.S. housing market collapsed , initiating the latest global economic and financial crisis, housing prices around the world started gradually recovering up to pre-crisis levels. However the data for Q1 2011 show that the overall pace of this recovery starts slowing down.
Is it a temporary retracement or the beginning of a new downtrend?
The results of 2010:
According to the housing market experts of , the year of 2010 was attended by the following tendencies:
· In the USA homes kept getting cheaper. According to the FHFA index, the U.S. housing market declined by 5.2%. The reasons are a lot of mortgaged property excepted by banks (which caused oversupply), high unemployment and economic instability in the country.
· The European housing market was multidirectional. In Eastern Europe the prices on residential property kept declining (Ukraine and Bulgaria were the frontrunners in terms of price decline – 9.5% down, Global Property Guide says). In Scandinavia the price decline slowed down (For example, Norway - 4,3% down in 2010 vs 10,1% in 2009). In some countries of Central and Southern Europe there was a slight increase in housing prices (Germany - 1.6%, Switzerland - 0,8%). However, most countries of the region could see their housing prices declining: Spain - 5,9%, Turkey – 4,8%, Netherlands – 2,6%. Europe’s frontrunner in terms of price growth was Latvia (19,1%) while Ireland set the opposite record (an 11,6% decline).
· In Asia housing prices were growing at different paces: Singapore’s housing market gained 13.6%, Taiwan - 9,7%, Thailand – only 2,9%, Philippines – only 0,2%. Honk Kong was the world’s leader in terms of price growth (20,1%). The “rest of China” came 2nd (Beijing and Shanghai - 15,3%).
According to Global Property Guide, the entire world was split into 2 camps: the one with declining prices and the one with growing prices.
The results of Q1 2011:
A couple of days ago Knight Frank published its international index of housing price dynamics in Q1 2011. In general, the company’s analysts say that the overall (global) pace of price growth slowed down:
· During the first quarter of 2011 the prices on residential property around the world grew only by 1.8% on average, which is the lowest value since late 2009.
· In 50% of the countries reviewed by Knight Frank the prices stayed the same or even slightly declined.
· The US remains among the outsiders in terms of price growth – the U.S. housing market saw another 0.4% decline.
· In Europe the average pace also declined by 4.1%. In Norway the prices on residential property increased by 5%.
· Asia still remains the frontrunner in terms of price growth: Hong Kong showed a 9.3% increase, India - 6,8%, Taiwan - 0,8%.
Similar data were provided by Global Property Guide in its report for Q1 2011:
· Residential property got cheaper in 59% of the reviewed countries. In 2009 the situation was completely different.
· The following countries became Europe’s frontrunners in terms of slowdown: Ireland (13,1%), Bulgaria (10,2%), Iceland (7,9%), Croatia (6,7%), Slovakia (5,6%) , Lithuania (4,4%). In Sweden the prices declined 0,5% (after gaining 10% in 2010), The UK’s housing prices lost 4,4% (after growing by 5,5% in 2010). The Finnish housing market saw a 0.7% decline (In 2010 it grew by 11.2%). Even in Germany, the EU’s strongest economy, housing prices lost 0.1%. Norway was the leader in terms of price growth in Europe (6.9% y/y).
· The U.S. housing market saw a 3.7% decline.
· Asia showed some growth: Singapore –8,2%, Taiwan – 6,8%, Hong Kong – 5%.
· Australia and New Zealand’s housing markets also weakened (3.4% and 4.8% down) mostly due to the natural disasters that hit those countries in early 2011.
The difference between the two ratings provided by Knight Frank and Global Property Guide is explained by the fact that the latter is composed with a glance at inflation.
Ivan Egorov, an expert in housing markets for , is sure that the declining pace of growth seen in most housing markets around the world is a long-term trend. The world will probably see residential property getting cheaper as the prices are expected to be pressed by growing mortgage rates and high inflation.
Market Leader and would be very grateful to you for expressing your own point of view on the matter. Please, visit the Academy’s forum and answer the question given below:
When will housing prices around the world reach pre-crisis levels?
· In a year or two
· In longer-term perspective
· They won’t recover as the world will be hit by another global crisis
Helena Izotova
