Slower growth is expected for the global housing market in 2011, with lending access and the direction of interest rates key to performance. Asia’s housing market will be less vulnerable than most, while Europe and the Americas could see mortgage constraints. Faltering markets like Ireland, Spain and even the US are returning to sustainable prices, while a slowdown is expected in markets including the UK and Australia. See the following article from Property Wire for more on this.
The post crash bounce in global housing markets is set to slow considerably in 2011 although things are improving in parts of Europe and there is a better outlook in Asia, a new report shows.
Spain, Ireland and a few Eastern European countries were the worst effected by the global downturn and did not experience any respite during 2009 and early 2010, the first ever Global Residential Market Forecast report from Knight Frank.
Indeed prices in some parts of Ireland are now lower by almost 50% from their peak in late 2006 and these markets are set to experience further price falls over the next 18 months, the report indicates.
But the rate of decline will slow with analysts predicting a fall of 11% in Ireland this year and a fall of 3% in 2011. Some of the most troubled markets in Eastern Europe, Latvia and Lithuania for example, are expected to post positive growth next year for the first time in three years.
The key driver in these locations is that prices are actually beginning to return to something close to a sustainable level. ‘This is partly because the relationship between prices, rents and incomes is falling more in line with their long run average,’ the report says.
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In locations like the UK, France, Australia and Canada, prices have performed well over the past 18 months. In the UK and France this has happened on the back of low rates and stimulus measures. In Australia a burgeoning economy tied into Asia’s economic boom has been the driver.
However, these are all examples of markets that stand well above long term measures of ‘fair pricing’, the report adds. ‘In the UK we expect that the second half of 2010 will see prices fall following the introduction of austerity measures by the government, such as tax hikes and spending cuts, but most importantly due to a shrinking mortgage market.’
However, a modest annual fall of 3.3% will not address the risk of a more significant adjustment should interest rates rise strongly from 2011 onwards, the report warns.
While the US appears to be experiencing a second wave of difficulties in terms of defaults and distressed loans, and again turnover volumes are at historically very low levels, it looks reasonable to assume that pricing will probably remain relatively static over the next 18 months.
‘The US is one market that has actually seen pricing return to much more realistic and sustainable levels over the past three years,’ the report points out.
Although Asia has been recovering well, Knight Frank expects a significant slowing in the rate of growth in locations like Hong Kong (18% in 2010, down to 12% in 2011), Singapore (10% to 3%), Australia (5% to 0%) and China (7% to 5%).
But overall the outlook is that the global housing market will deliver positive growth in 2011 overall and the real test for market resilience, especially in Europe and the US, is likely to come at some point in 2011 when interest rates begin to climb from their current historic lows.
‘The UK is one of the markets most at risk from this process. Funding constraints, for both developers and purchasers, will begin to limit the recovery in development volumes in 2011, meaning that a structural undersupply of housing will contribute to slightly higher than trend rates of price growth from 2012 and beyond. There will be some noticeable exceptions to this trend, due to a continuing and significant over-hang of supply, the US, Spain,
Ireland being the prime examples, the report says.
It concludes that the most significant factor which will determine the performance of the global housing market in 2011 will be the ability of lenders to continue to offer new funding to the market in an environment where debt levels are still critically high in the West.
In Asia and most emerging markets, with lower consumer debt, the issue is far less acute, and mortgage market debt is still a fraction of western levels. The confidence with which governments across the globe are looking to influence, if not control, their national housing markets is undimmed, it adds, and predicts that there will be more mortgage market controls in Europe and potentially north and south America in 2011.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.