House prices across the globe are up by 8.5%, with some areas experiencing record growth. According to the latest Knight Frank Global House Price Survey, Latvia, Bulgaria and Denmark have all experienced rising prices.
In most other areas however, slower price growth has been recorded over the last year. But the market is not going to crash, according to Knight Frank, and investors are warned not to shy away from the market: ‘The wider trend will mask regional investment opportunities,’ said Liam Bailey, head of Knight Frank Research.
Knight Frank’s Global House Price Index tracks average house prices across a selection of 30 countries from the US, Europe, Africa and Asia. The index is based on an assessment of price changes in the broad mainstream housing markets of the countries covered.
While the figures pointed to rocketing prices in Eastern block areas such as Latvia (up 45%), Bulgaria (up 20.5%) and Denmark (up 15.4%), Hong Kong experienced a sharp reversal of fortunes. Serbia, Japan and Hong Kong also produced slow price growth in the last 12 months.
‘Wage inflation, growing prosperity and access to less constrained mortgage finance have all contributed to rapidly rising prices in the Eastern Block,’ said Liam Bailey, adding that slower house price growth globally suggests that affordability constraints have been hit in other locations.
‘Our forecast is that we will see continued slowing of average global house price growth over the rest of 2006 and into 2007,’ Mr Bailey explained. But according to Knight Frank, the market is not going to crash. Mr Bailey believes today’s global market is more realistic and advises investors to look carefully a regional ‘hot spots’ which could be masked by the current market conditions.
Global Investment Hot Spots 2006/7:
Germany – Europe’s largest economy, and the world’s largest exporter is still underperforming and we believe will see sustained growth
Slovenia and Slovakia – the two countries with the best potential for further growth in Eastern Europe (not yet in the index but joining
from next quarter with new data sets available)
Cyprus – has potential for growth over the medium term – once the VAT changes are implemented and settle down
Russia – effectively Moscow, has the potential for more growth and will rival eventually rival London as the most expensive world city
within five years