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Economic pressures affecting global property markets

The index, which tracks the performance of the world’s mainstream housing markets, showed zero growth in the three months to September, its weakest performance since the second quarter of 2009 and raises fears that it could enter negative territory by the end of the year.

It says that the third quarter saw mounting pressures on the global economy with politicians seemingly helpless to get to grips with the Eurozone debt crisis. This has reawakened fears of a double dip recession in Europe and around the world. This economic uncertainty has been reflected in the performance of the world’s housing markets with average annual growth now stands at just 1.5%.

The East/West divide in price performance, evident since 2008, is now starting to fade as the deflationary measures applied by policy makers in Asia start to take effect, the report points out. Average annual price growth in Asia has fallen from 15.2% in the first quarter of 2010 to 6.9% in the third quarter of 2011.

Data for Portugal, Ireland, Italy, Greece and Spain from the last three months suggests that their housing markets may be over the worst, despite the economic turmoil they are facing. Although prices in all five housing markets continued to fall, the pace of decline slowed in all but Portugal.

By contrast, however, the latest results from the index suggest that house price growth in some of the world’s fastest growing economies is running out of steam. On average, these countries recorded price rises of just 0.9% in the past three months.

House prices fell in 54% of the countries monitored by the index and average price growth was zero. Hong Kong has been the strongest performer. House prices have risen 19% in the past 12 months. Prices in Ireland have fallen the most, down 14% in the past 12 months while Europe is the weakest performing world region. Prices fell on average by 0.5% in the last year.

Looking forward, house prices are likely to show little improvement in the final quarter of 2011 given that much of the unravelling of the Eurozone sovereign debt crisis took place post-September and has yet to be reflected in the index results.

The luxury housing markets appear to be better insulated from the new weaker phase than mainstream markets, partly due to the scale of global wealth generation, the ongoing search for safe haven investments and the growing divide between the prime markets in the West and the rest of the world, the report explains.