Global housing markets showing signs of tentative recovery: Knight Frank

PETALING JAYA: Even though global housing markets are showing signs of tentative recovery, the market is still seen as fragile, according to Knight Frank Global House Price Index 2Q2009.

“It now appears that house prices are starting to stabilise across the world. The latest results from our Global House Price Index show values increased in almost half of the locations reporting price changes for the second quarter of the year. Significantly, quarterly price falls accelerated in only 22% of the locations and did not exceed 10% in any country. This compares with double-digit falls in a number of locations during the first quarter,” said Liam Bailey, head of Knight Frank’s residential research.

Israel retains its position as the top performer on an annual basis, recording a price increase of 12.5% to the end of 2Q2009.  Norway posted strong quarterly gains, increasing by 5.3%, making it the country’s second successive quarterly gain after a 4.1% hike in 1Q2009.

Northern Scandinavia is recovering well in 2Q2009, with Sweden registering a 3.5% increase and Finland, 3.9%. “This is probably because prices didn’t increase to the same extent as other areas during the property boom. There has also been a sharp slowdown in the number of houses under construction. In Sweden, construction started on 45% fewer houses in 1H2009 compared with the same period last year. In Norway, new starts have fallen to their lowest levels since 2000,” said Bailey.

In the UK, the prices have increased by 1.1% and this is mainly attributed to the imbalance between supply and pent-up demand. The country where the sub-prime mortgage crises began, the US is also showing signs of recovery as the prices bounced back with a 1.3% increase in 2Q after registering falls of 7% in 1Q2009 and 4Q2008.

Some countries are not faring as well. Dubai recorded the largest annual and second largest quarterly drops in the index at – 47% and – 7.5% respectively. However, Bailey noted that the decline has slowed sharply.

“The second-quarter drop in Dubai was only 7.5% compared with a massive 41% slide during the previous three months. While the market remains over supplied, transaction volumes have started to increase on the back of reduced asking prices, the increased availability of credit and more certainty from developers regarding the completion dates of projects,” added Bailey.

Other countries registering price drops are Bulgaria, falling by 9.7% and Thailand by 5.6%. The drop in Thailand came after an increase of 2.7% in 1Q2009 and is prove that one quarter of recovery is no guarantee prices will continue to increase.

Bailey said it should be noted that the global picture is not fully completed, as some countries such as Estonia, that recorded large price falls at the beginning of the year, have not yet reported their second quarter results.

“Further falls are always a possibility while credit flows remain constrained and the global economy struggles to recover from the recession, but it does appear that the worst is behind us,” said Bailey.