Global house price growth has slowed sharply since 2004, according to the newly launched Knight Frank Global House Price Index. The figures show that the average global house price is 6.1% higher than a year ago ? a downturn since 2004 when annual growth was 10.9%. But according to Knight Frank investors need to keep their wits about them as the general slowing of global house price growth will disguise many regional hot-spots and investment opportunities.
Price growth was led by Estonia (17%), Denmark (16.1%) and New Zealand (13.5%) with the slowest growth experienced in Serbia-Macedonia, Japan and Hong Kong. In fact Hong Kong revealed the sharpest reversal of fortune, moving from 23% growth in early 2005 to negative growth in early 2006. According to Liam Bailey, the early boom in house prices was led by the UK and Ireland in the second half of the 1990s with Australia catching up by 2000. More and more countries saw house prices rising throughout the early 2000s.
But Knight Frank encourages investors to look for opportunities within the cooling global housing market. ‘Whilst prices in the UK and France are respectively 35.4% and 46.2% higher now than they were three years ago ? prices in Germany are 2.1% lower over the same period,’ explains Mr Bailey. ‘We believe that stronger than anticipated economic performance will lead to above average performance in Germany from 2007.’
Ireland has also shown increasing resilience according to Knight Frank’s data, now standing at number six in the first quarter of 2006 with annualised growth of 10.7%, compared to only 7.5% a year earlier. Meanwhile the UK is no longer the strong performer; current annualised growth at 5.3% places the UK exactly in the centre of the table in 14th position out of 28 countries. Mr Bailey predicts the process of ‘levelling up’ in Eastern Europe will continue over the next five years, with average prices coming close to the EU average.
The Knight Frank Global House Price Index is the first serious attempt to analyse pricing trends in residential property across the world on a standardised basis. ‘Those familiar with the UK residential market will be surprised to learn that not every nationality finds house prices a subject for fascination,’ says Mr Bailey, ‘This unfortunately means there is a resulting lack of data to assess market movements in many countries. Even tracking basic data on house prices within the European Union can be problematic.’ The Index relies on official national statistics or a well respected national financial institution such as a large mortgage lender.