International Real Estate Markets Staging A Strong Comeback

With price growth in nearly 70 percent of markets, global real estate is staging a strong comeback, while government intervention should continue to be a major factor in …

With price growth in nearly 70 percent of markets, global real estate is staging a strong comeback, while government intervention should continue to be a major factor in recovery going forward. Led by Asia, market winners and losers are clear, but price cooling measures and stimulus efforts are slowly closing the gap. See the following article from Property Wire for more on this.

Asia continues to lead the global real estate market recovery with average prices rising 14% in the past year, a new report shows.

Prices increased in 69% of worldwide locations in the year up to the end of June, up from 19% a year earlier, the latest Knight Frank Global House Price Index also shows.

The second quarter of the year is the second consecutive quarter that the average annual growth for all global locations has risen, up by 3.9%.

Top performers are the Asian economies of Singapore, China and Hong Kong however their quarterly rate of growth suggests these heated markets are starting to cool.

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Europe continues to record the weakest performance of all world regions, although it is an improving picture, up from -4.1% in the first quarter of the year to -0.1% in the second quarter.

‘Each quarter we are presented with further evidence that the impact of the global recession on the world’s housing markets is diminishing,’ said Liam Bailey, head of residential research at Knight Frank.

He pointed out that a slight convergence is occurring with the disparity between the top and bottom of the table being less pronounced than a year earlier. On the one hand, government intervention, particularly in the heated Asian economies, is starting to have the desired cooling effect as indicated by the latest quarterly results.

On the other hand, economic stimulus measures put in place by many western governments such as ultra-low interest rates, first time buyer concessions and targeted support for banks have encouraged house buyers and this increase in demand has helped push prices higher, albeit moderately so.

He believes that prices are beginning to return to something close to a sustainable level as the relationship between prices, rents and incomes falls more in line with their long-run average.

‘The performance of the global housing markets can still easily be grouped by world region with the Asia Pacific countries occupying the top of the table and the European economies the bottom. However, sub-divisions within these groups are starting to emerge. In Asia for example, the housing markets of Singapore, China and Hong Kong are clearly outperforming their neighbors in India,  Indonesia and Japan which are ranked in positions 26, 29, and 42 respectively. In Europe too, there is a clear divergence with the Nordic countries recording annual growth of between 8 and 11% and most of their Baltic and Southern European counterparts experiencing negative growth,’ said Bailey.

Despite the fact that Europe continues to record the weakest performance of all world regions, it is an improving picture. This trend is mirrored in Ireland where the rate of decline appears to be slowing. House prices in Ireland fell 1.7% in the three months to June 2010 compared to a quarterly fall of 4.2% a year earlier. House prices in Ireland now stand at the same point they did at the end of 2002 due principally to a significant overhang of supply and lending constraints.

Aside from Asia Pacific’s strong performers, South Africa and Canada represent some of the most heated housing markets recording annual price growth of 14.8% and 13.5% respectively. ‘There is speculation as to whether Canada’s housing market is entering bubble territory, mindful of this the government has already raised the base rate on three occasions this year and has reduced the maximum allowable amortization period from 40 years down to 35 years,’ explained Bailey.

‘The potential risks to future growth are many and varied. For western economies the availability of new funding, the scale of austerity measures, earnings and employment growth will prove critical to the health of their housing markets. In Asia, a lot hinges on how far governments intervene in fiscal policy. In China for example, the government’s recent decision to increase interest rates to 5.56% from 5.31%, the first rise since 2007, represents a serious attempt to curb both inflation and its investment-led economy,’ he added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.


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