Knight Frank: Global housing market at its weakest since 2009

KUALA LUMPUR/SINGAPORE: Worldwide mainstream house price inflation marginally avoided falling into negative territory, with global house prices rising on average by 0.1% in the three months to June 2011 contributing to an annual growth of 1.7% over a 12-month period, according to the Knight Frank Global House Price Index for the second quarter (2Q) of 2011.

The data shows that the global housing market could be at its weakest since 2009, revealing the extent to which many of the world's economies are struggling in the wake of the 2008-09 global crisis.

North America and Europe remain the weakest performing world regions, here prices declined by 0.9% and 0.1% respectively in the last 12 months.

"Lending, for most developed economies, remains constrained, confidence is low and households' disposable incomes are waning," said Knight Frank Residential Research in a media statement recently.

The research house added that the overall fall in prices can also be partly attributed to the absence of a double-digit annual price growth, which was observed in China, Singapore and India during much of 2009 and 2010.

According to Knight Frank, Asian policy measures aimed at cooling asset price growth are having some success. Annual price growth in Singapore stood at 6.7% in 2Q 2011, down from 37% a year earlier. Similar patterns are emerging in India and China, which both recorded quarterly price falls in the three months to June, of 1.7% and 0.1% respectively.

Nevertheless, Asia continues to outperform other regions in terms of house price inflation as prices in the region rose on average 8.0% in the last 12 months. Price growth is strongest in Hong Kong, which saw 26.5% growth in the last 12 months.

Asia has been the top-performing continent for seven consecutive quarters. A key component of Asia's 8% annual growth in 2Q 2011 has been Hong Kong's strong performance. "The Hong Kong market has displayed greater resistance to anti-inflationary measures, but evidence suggests the tide is starting to turn. In 2Q 2011, quarterly price growth reached 3.5%, down from 10.1% last quarter," said Knight Frank.

The research consultancy added that the world's prime or luxury markets appear to be insulated for the moment from this new weaker phase.

"In fact, global economic and political turbulence has underlined their 'safe haven' qualities in the eyes of the world's wealthy elite. Looking forward, it is difficult to be positive about price prospects in the developed world's mainstream housing markets. Ongoing low interest rates and other market support measures are likely to spur increased sales activity rather than price growth," it said.