The Star, 15 Sept 2009
UNITED KINGDOM: The market is still fragile and patchy despite the global housing markets starting to show tentative signs of recovery with property prices and values increasing in almost 50% of the countries under the survey, according to the latest Knight Frank Global House Price Index (GHPI) for 2Q2009.
“Overall, it seems that prices are starting to bottom out around the world. However, the market is still fragile and patchy,” says Liam Bailey head of residential research at Knight Frank.
“Prices in Bulgaria, for example, reduced by 9.7% in the second quarter of 2009- only a slight improvement on the country’s first-quarter fall of 12.4%.
“In Thailand, values fell by 5.6% after an increase of 2.7% in the first quarter, underlining that one quarter of recovery is no guarantee prices will continue to increase,” he adds.
Bailey: Overall, it seems that prices are starting to bottom out around the world. However, the market is still fragile and patchy
However, on a positive note, Bailey says: “It appears now, that house prices are starting to stabilise across the world. The latest results from our GHPI showed values increased in almost half of the locations reporting price changes for the second quarter of the year.”
Among the 33 countries examined, which include the United States, New Zealand, China, Australia, United Kingdom, Indonesia and Thailand- the quarterly report also indicates recovery with decline in prices slowed down, particularly among countries which reported sharp fall in prices at the start 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,” he adds.
Having said that, Bailey notes that Israel remains the top performer on an annual basis and is the only country to have recorded double-digit growth of 12.5%. Where as, Switzerland and Indonesia were the 2nd and 3rd best performers, each reporting a 6.1% and 2.1% increase in prices respectively in the 12 months to the end of June 2009.
On a quarterly basis, while a number of other countries have posted stronger quarterly gains, Norway saw the biggest rise with prices up 5.3% during the second quarter of 2009, followed by Australia (+4.2%), Israel (+4.0%), Finland (+3.9%) and Sweden (+3.6%) in a decreasing order. The northern Scandinavia in general also seems to be recovering well with prices, says Bailey.
“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,” he explains.
In Sweden, for example, construction started on 45% fewer houses in the first half of 2009 compared to the same period last year. While in Norway, new starts have fallen to their lowest levels since 2000.
“An imbalance between supply and pent-up demand also helped the UK’s housing market, which increased by 1.1% in the second quarter.
“Even the US, where sub-prime mortgage crisis started, is starting to see a recovery. Prices increased 1.3% in the second quarter following falls of 7% in each of the previous two quarters,” says Bailey.
While Dubai recorded the worst price falls of 47.3% in the 12 months to June 2009, its prices are still reported falling, but the good news is that decline has slowed sharply with only a 7.5% price fall reported in 2Q2009 as compared to a substantial 41% slide during 1Q2009, the report says.
While the market still 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, Bailey says.
Bailey concludes that while prices are starting to bottom out around the world amid the backdrop of a fragile and patchy market, it is also worth noting a number of countries, such as Estonia, that recorded large price falls at the beginning of the year have not yet reported their second quarter results, therefore the global picture is not fully complete.
“Further falls are always a possibility while credit flows remain constrained and the global economy struggles to recover from recession, but it does appear that the worst is behind us,” he adds.
