Property price growth is moderating in key nations around the world

Property prices are continuing to rise in the vast majority of key nations around the world, but growth is moderating, according to the latest global residential real estate index.

Overall prices in the 57 countries covered by the Knight Frank index increased by 4.7% in the year to June 2018 and only seven saw prices fall year on year.

Growth was led by Malta where prices increased by 17%, followed by Hong Kong up by 16.9%, Latvia up 13.7%, Slovenia up 13.4%, Hungary up 12.2%, Ireland up 12%, Turkey up 10.5% and Mexico up 9.9%.

Prices fell by 4.5% in Ukraine, by 1.6% in Peru, by 1.3% in Saudi Arabia, by 0.7% in Brazil, by 0.4% in Italy, by 0.3% in Finland, by 0.2% in Israel and were flat in Sweden and Morocco while prices increased by just 0.8% in Greece.

Kate Everett-Allen, residential research partner at Knight Frank, pointed out that cities in central and Eastern European countries are performing strongly and all eyes are on Hong Kong, Singapore, and New Zealand where new property regulations have been introduced in the last three months and where prices increased by 16%, 9% and 7% respectively.

She also pointed out that only 12% of countries and territories registered a decline in prices in annual terms and no market has recorded a double digit decline in house prices over the last six quarters.

‘Five years ago, 30% of countries were recording a drop in house prices, and ten years ago, in the wake of the financial crisis, the figure was as high as 70%. Yet despite this improving scenario, at 4.7% the index has recorded its slowest rate of annual growth since the third quarter of 2016,’ she said.

‘Our analysis confirms that whilst fewer countries and territories are seeing a decline in house prices, where prices are rising, they are rising at a more moderate pace. The rising cost of finance, an uncertain political and economic climate and currency instability in some markets is likely to be tempering demand,’ she explained.

‘Hong Kong acts a case in point. A city which has led our rankings for price growth on ten occasions since 2009, is expected to cool in the coming months as a result of rising interest rates. Along with Singapore and New Zealand, Hong Kong has also seen new property market regulations introduced in the last three months,’ she added.

At the same time central and Eastern Europe is emerging as a region of strong growth. Latvia, Slovenia and Hungary all saw prices accelerate by between 12% and 14% over the year to June 2018 and the region as a whole registered average growth of 8% compared with 5.1% for the rest of Europe.

‘Strengthening economies, improving employment and the wider availability of low rate mortgages are behind the region’s strong performance. Turkey’s travails mean that although prices are rising at an annual rate of 11%, according to the latest data from the Central Bank of the Republic of Turkey, when inflation of 16% plus is factored in, prices in real terms are now falling,’ said Everett-Allen.

‘With the 10 year anniversary of the collapse of Lehman Brothers approaching on 15 September, a brief look at house prices over this period, where data permits, shows mainstream house prices in 12 of the 57 countries are still below their third quarter 2008 level, including those in Spain, Ireland, Italy, Greece and Russia,’ she concluded.