Slower price growth this year, says Knight Frank

KUALA LUMPUR: Despite slower growth in Knight Frank Global House Price Index in the first quarter of 2014 (1Q14), Knight Frank expects the index to strengthen in 2Q14.

“All eyes will remain on central banks, in particular the Federal Reserve, the Bank of England and the European Central Bank. The issue is not when interest rates rise but the speed and extent to which they do,” according to Knight Frank international residential analyst Kate Everett-Allen.

She noted that for the first time since 2008, no single country tracked by the Global House Price Index has recorded an annual price fall in excess of 10%.

Prices grew a marginal 0.6% in the quarter compared with 1.2% a year ago. However, annual price growth was steady at 7.1%.

“The final quarter of the year often sees a peak in sales transactions as buyers rush to complete sales before the New Year when new tax rules often come into effect, leading to a quieter market in the first quarter,” said Everett-Allen in the report.

In 1Q14, Dubai topped the annual ranking for the fourth consecutive quarter, but prices rose 3.4% compared to a 9.2% jump in the corresponding period last year.

The top five countries that recorded the most annual growth were Dubai (27.7%), China (17.5%), Estonia (16.2%), Turkey (13.8%), and Taiwan at 12.2%. They were followed by Australia, the US and Iceland with growth of 10.9%, 10.3% and 9.7% respectively.

According to the report, Eastern and Southern Europe are at the bottom 10 rankings as house prices in the region are still  declining.

“However, these declines have fallen at a slower rate, even in the weakest housing markets such as Greece (-8.4%), Cyprus (-8.7%) and Croatia (-9.7%) year-on-year,” said Everett-Allen.

She noted Singapore and Japan are the only non-European countries in the bottom 14 rankings. This is due to cooling measures and tighter mortgage lending conditions that have halted price growth for Singapore while Japan’s “abenomics” has yet to push house price growth into positive territory.

This article first appeared in The Edge Financial Daily, on June 13, 2014.

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