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Global housing markets have entered a period of relative calm. The great price falls of the past three years are over but there is still cause for concern, according to online research house Global Property Guide’s latest survey of global house prices for the year ending 1Q2011.
According to the survey, there was a general downtrend for the one-year period to 1Q2011. Of the 39 countries with timely house price statistics for the one-year period to 1Q2011, 16 countries saw increases in house prices (inflation-adjusted), while 23 countries saw house price reductions.
During the first three months of 2011, house prices rose (q-o-q) in 12 countries (inflation-adjusted) and fell (q-o-q) in 27 countries.
Twelve up, 27 down — is this a seasonal trend? The answer is no. In comparison, house prices rose in 20 countries and fell in 16 during 1Q2010.
“These price declines are somewhat worrying. As inflation and interest rates rise, things are unlikely to get better. As our research has repeatedly showed, housing markets globally are generally over-valued, and this excess valuation still needs to be unwound,” says Global Property Guide, adding that its survey measures price changes after inflation, giving a more realistic picture than the upbeat nominal figures preferred by real estate agents.
Europe’s housing markets have generally been weak. For some exceptionally “hard hit” countries, this past year actually accelerated the crisis: Ireland had the worst annual price decline among countries in the survey, with house prices down 13.1% y-o-y in 1Q2011, after a 13.6% decline the previous year. Spain’s prices fell 7.9% y-o-y in 1Q2011, following a 5.8% fall the year before.
Many housing markets of countries badly hit by the crisis have continued to fall. Many European countries whose house prices declined strongly in 2009 continued to experience a downtrend in 2010, although at a much slower pace, including Iceland (-0.8%), Poland (Warsaw) (-2.7%), Slovenia (-3.8%), Lithuania (-4.4%), the Slovak Republic (-5.6%), Croatia (-6.7%) and Bulgaria (-10.2%).
“Bounce-back” European countries that initially saw a vigorous recovery from dramatic house-price declines are now slowing down. Standard-type apartments in Riga, Latvia, were up 4.1% over the year to 1Q2011. But this was in sharp contrast with the double-digit rise during the year to end-3Q2010 (+24.7%).
Prices of dwellings in Tallinn, Estonia, rose 2.5% over the year to end-1Q2011. However, the housing market is at a standstill, with a -1.8% drop during the first quarter of this year. The Nordic countries, with the exception of Norway, are cooling. In Sweden, prices of one- and two-dwelling buildings dropped 0.5% y-o-y in 1Q2011, after a 10% growth a year earlier. The Swedish housing market has cooled following five interest rate increases, and a cap on mortgage-to-value ratios of 85%. In Finland, prices of old dwellings rose a meagre 0.7% y-o-y in 1Q2011, after surging 11.2% during the same period the previous year.
Several other European markets are also cooling down. In the UK, average house prices were down 4.4% y-o-y in 1Q2011, after a 5.5% rise the previous year. Homebuyers are currently reluctant to purchase or invest in the property market as there are fears about the economy. The government’s austerity measures are already having a real impact on household budgets.
In Germany, apartment prices fell 0.1% y-o-y in 1Q2011, after a rise of 0.1% the previous year. However, given Germany’s strong economic performance, demand is expected to strengthen in the following months.
In Portugal, the average housing bank evaluation slumped 6.2% y-o-y in 1Q2011, after a 3.3% rise the year before. The Portuguese housing market faces weak demand, high unemployment (11.1% in 4Q2010) and a very depressed level of consumer confidence.
But all is not gloom and doom for Europe.
Norway’s housing market was Europe’s best performer, with house prices up 6.9% y-o-y in 1Q2011, buoyed by the high growth in real wages and a relatively modest interest rate. Norway has a fast-growing population, and a relatively low rate of construction of new properties. In Vienna, Austria, house prices were up 6.5%, the seventh year of continuous house price increases. In France, prices of existing dwellings rose 2.7% y-o-y in 1Q2011. House prices have been stable since 2Q2010. In Switzerland, apartment prices continued to rise, as they have for the last decade. During the year to 1Q2011, apartment prices were up 1%.
The US housing markets remain weak. House prices in the US fell 7.5% y-o-y in 1Q2011, and dropped 3.7% during the first three months of this year, according to the Federal Housing Finance Agency’s (FHFA) purchase-only index. 1Q2011 was the steepest quarterly decline since late-2008. The US remains weak due to a massive supply overhang and weak demand, and remains on a downward path.
Asian housing markets have generally continued to surge. Hong Kong was up 18.8% y-o-y in 1Q2011, after a massive 27.9% rise during the same period the previous year. Hong Kong house prices also surged 5% during the first three months of 2011. The market-cooling Special Stamp Duty (SSD) introduced in 4Q2010 only had a short-term impact, partly because Hong Kong’s economy grew an impressive 7.2% (in real terms) y-o-y in 1Q2011.
Singapore’s housing market was up 8.2% y-o-y in 1Q2011, following a 24% rise during the same period the previous year. But Singaporean authorities have tamed the market, and this year’s 1Q house prices increased an insignificant 0.4%.
In Taiwan, house prices increased 6.8% y-o-y in1Q2011 in spite of interest rate hikes last year. This spurred the government to pass a luxury tax in April to curb rampant speculation in the property market. Thailand (+4.6%), Malaysia (+3.4%) and Japan (+2.8%) have also seen price rises. But the property market in Shanghai, China, is weakening (-3.6%).
House prices in Israel rose 7.8% y-o-y in 1Q2011, compared with a 15.7% rise the previous year. The Pacific region has been hit by natural disasters, and Australia (-3.4%) and New Zealand (-4.8%) are both down. — Global Property Guide
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 861, June 6-12, 2011
