City&Country: Offshore-- Uneven recovery in global housing markets

Housing markets in the world’s leading economies continue to recover but many remain distressed as well, according to online property research house Global Property Guide’s summary of housing statistics for the year to end-3Q2009 (

Of the 27 countries which have published their 3Q data, more have experienced house price falls (17 countries) YTD than have enjoyed price rises (10). In addition, the decline in house prices in several countries has been larger than house price rises anywhere, including unprecedented severe drop in Latvia (-59.7% YTD), the UAE (-48.1%), Bulgaria (-28.7%), Iceland (-21.2%), Russia (-19.5%) and Slovakia (-15.3%) (All figures are inflation-adjusted.)

During the latest quarter, of the 27 countries, 16 have registered price rises while only 11 saw declines (both major US indices were nominally positive, but adjusting for inflation puts the Federal Housing Finance Agency (FHFA) index still in negative territory). Q-o-q house price changes in the UK, Canada, Germany, Singapore, and South Africa are back in positive territory.

So, the trend is towards recovery. More broadly, the world seems polarised between the Asian economies, which are enjoying strong economic growth and high residential property price rises (except Thailand), and Eastern Europe and the UAE, where growth has stalled and property markets have crashed. Even there, figures for the latest quarter offer hope.

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. The fact that housing markets are recovering in inflation-adjusted terms is significant, as the dramatic declines of housing busts are typically followed by a period in which house prices are static in nominal terms, but decline in real (inflation-adjusted) terms.

Israel’s housing market has been the best performer for two quarters in a row. House prices rose 10.2% over the year to end-3Q2009, from 8.4% increase over the year to end-2Q2009.

In Asia-Pacific, Australia’s housing markets were up 4.9% y-o-y to end-3Q2009. Darwin had the highest price increase among Australia’s eight capital cities, followed by Melbourne and Canberra. The upsurge appears to have been partly fuelled by a genuine housing supply shortage. Key interest rates in Australia are now on the rise.

New Zealand experienced a more modest increase of 2% over the year to end-3Q2009. Median sales prices in New Zealand are now back at mid-2008 levels.

Hong Kong’s housing market is causing concern about over-ebullience. House prices rose by 3.1% over the year to end-3Q2009, a significant improvement from the 7% decline y--o-y to 2Q2009. During the three months to September, house prices jumped 11.1%.

In Singapore, overheating is a concern, too. House prices jumped by an all-time record quarterly 14.3% increase (though house prices in Singapore are still down 11% over the year). Singapore’s economy has expanded 0.5% during the year to end-3Q2009. Its construction and manufacturing sectors are the primary source of growth, having expanded 12.8% and 6.6% (y-o-y), respectively.

The UK, Canada, Germany, and South Africa have seen increases during 3Q2009, after suffering declines every quarter since 2008. In the UK, house prices were up 3.4% in 3Q, according to Nationwide, and 2.1%, according to the Land Registry. UK house prices have been rallying since May.

In the US, 3Q house price changes were nominally up 3.1%, according to the Case-Schiller index, or up 1.2% after inflation. In nominal terms, the Case-Shiller recorded a 8.9% decline in the year to end-3Q2009, a marked improvement over the 14.7% decline in the year to end-2Q2009, and the 19% drop in year to end-1Q2009.

Investors in Dubai, UAE, have something to be optimistic about. Dubai’s nominal house price index increased 7% during 3Q2009, a significant improvement from an 8% drop during 2Q2009. (No inflation-adjusted figures are available for Dubai). This is the first q-o-q increase since the financial crisis hit the emirate in late 2008. However, over the year to end-3Q2009, Dubai’s nominal house prices are still down by 47%.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 783, Nov 30 – Dec 6, 2009.

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