Global house prices rise by 4% but vary from 14% growth to fall of 9.4%

House prices around the world have increased by 4% in the year to June 2016, led by Turkey whiles prices in parts of Asia have cooled considerably, the latest index shows.

Turkey leads the rankings in the Knight Frank global house index but its annual rate of growth has slipped from 19% to 14% while China’s average annual growth of 5.9% hides significant variations at a city level.

New Zealand is second with annual growth of 11.2%, then Canada up 10%, Chile up 9.4%, Sweden up 8.9%, Malta up 8.8%, Austria and Iceland both up 8.1%, Mexico up 8% and finally in the top 10, Germany up 7.9%.

The data also shows that the key Asian markets of Hong Kong, Taiwan and Singapore occupy three of the bottom five rankings for the second quarter of the year.

Meanwhile, in the UK and the United States housing markets have followed similar paths in the last year with prices rising by 5.2% and 5.1% respectively.

Over recent quarters Turkey, New Zealand, Canada and Sweden have occupied some of the top positions in the index whilst key Asian markets have dominated the lower ranks and the overall aggregate index has followed a similar narrative, consistently recording 4% annual growth, or thereabouts, for the last two years.

Yet closer inspection shows the extremes are moderating. The percentage points separating the strongest and weakest performing housing market have narrowed from 33 points in the third quarter of 2015 to 23 this quarter. Of the top five performing countries, Turkey and Sweden are the only two markets where price growth has slowed compared with last quarter, down from 19% to 14% and from 13% to 9% respectively.

The index tracks nominal price growth but if the figures for real price growth are examined, where inflation is stripped out, New Zealand finds itself in first place with 11% annual growth whilst Turkey, with inflation in excess of 7%, is pushed down into 13th position.

According to Kate Everett-Allen, head of international residential research at Knight Frank, all eyes in the coming months will be on the UK and the US. ‘The outcome of the US presidential election and the negotiations following the UK’s Brexit decision will ultimately determine the confidence of owner occupiers and the flow of investor capital across a large part of the world in the short to medium term,’ she said.

The latest data suggests the build-up to the Olympic Games was unable to act as a counterbalance to Brazil’s slowing economy and housing market. Average prices slipped by 0.7% year on year whilst Rio saw prices fall by 3.6% over the same period.

China’s average house price growth stood at 5.9% in the 12 months to June but the gap between the top five performing cities of Beijing, Guangzhou, Sanya, Shanghai and Shenzhen and China’s remaining cities is widening. The report points out that the Chinese government has unveiled a series of measures in recent months to either spur on, or curb investment, depending on the level of activity in the different city tiers.

The Asian markets of Hong Kong, Taiwan and Singapore occupy three of the bottom five rankings this quarter. Weak economic growth, stringent cooling measures and the strong US dollar continue to hamper sales rates.

Taiwan is bottom with price falling by 9.4% year on year, followed by the Ukraine where prices fell by 9.2% while in Hong Kong they were down by 8.1%, down by 3.6% in Morocco, by 2.9% in Greece, by 2.4% in Singapore and by 1.6% in Cyprus.

The only other nations to see prices fall year on year were Italy, Brazil, Japan and Poland with price falls of 1.2%, 0.7%, 0.3% and 0.1% respectively.