It is the first quarterly decline in over two years and underlined the fragility of the global economic recovery and how it is affecting buyer sentiment, says the latest global house index from Knight Frank.
Indeed, it is the index’s weakest performance since the third quarter of 2012 and the report cites falling oil prices, tensions between Greece and the Eurozone, a weak outlook for the Chinese economy and the Ukraine crisis as factors.
Ireland leads the price growth rankings, with prices ending the year 16% higher, but average prices remain 38% below their peak having fallen 51% since the third quarter of 2007.
However, five countries recorded double digit price rises in 2014, Turkey and Hong Kong amongst them. Ukraine, meanwhile, was the only county to record a double digit price fall over the 12 month period, down 17%.
Overall Europe remains the weakest performing world region with prices rising on average by 1.6% during 2014. The report points out that while Spain and the UK have seen an upturn, albeit in Spain’s case this translates into a slower rate of decline as opposed to positive price growth.
Hong Kong and Dubai, by comparison, have seen price growth slow. Dubai mainstream residential prices fell by 5.2% in the three months to September, the emirate’s first quarterly decline in prices in the last four years.
‘The current mismatch between demand and supply is behind the fall. Residential sales have fallen sharply in recent months and there is a steady stream of new schemes reaching completion, which in turn is exerting downward pressure on prices,’ said Kate Everett-Allen, head of international residential research at Knight Frank.
‘Fewer countries are reaching the heights of double digit price growth but it’s not all bad news. No country has recorded an annual fall in house prices in excess of 10% for three consecutive quarters suggesting a slight convergence in the performance of the 54 housing markets tracked,’ she added.
But the report shows that China’s slowdown continued with 58 of the 70 cities tracked by the National Bureau of Statistics recording price falls in the year to September while two cities saw prices stay the same and 10 recorded price increases. The city of Xiamen saw the strongest annual rise of 4.9%.
In the United States, the price of a single family home increased by 4.8%, down on last quarter’s figure of 6.2%. Miami is the key city bucking the national trend, with prices rising by 10.3% year on year.
Analysis by world region shows the Middle East recorded the strongest price growth at 9.5% in the year to September. Quarterly analysis shows all the world regions to be borderline anaemic with South America, the top performer recording 1.6% growth. This was due predominantly to Brazil and Colombia’s steady performance over the three month period.
‘Although the rate of global annual growth declined between 2013 and 2014 from 6.3% to 1.8%, the gap between the top and bottom ranked countries shrank from 61 percentage points at the end of 2013 to 33 at the end of 2014, suggesting that there is a degree of convergence taking place amongst global housing markets,’ Everett-Allen concluded.
