House prices in trouble across the world in 2010

by John Fitzsimons on 21 December 2010  |  13 comments
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2010 has been a tricky year for house prices across the world.

It’s easy to concentrate on our own property market when it comes to house prices.

But it’s not just the UK that has seen its house price recovery hit the rocks in recent times. According to new research from Knight Frank, plenty of areas across the world are finding it pretty tough too. Indeed, Knight Frank have suggested it shows that the global house price recovery seen since the credit crunch truly hit may not have run out of steam.

So what’s the story, and what can we learn from the experiences of other nations?

The 10 worst performers

The latest Global House Price index from Knight Frank revealed that Q3 represented a tough few months for housing markets the world over. While annual house price growth stood at 3.1%, Europe was by far the weakest region, with growth of just 0.8%. And that flattered some nations, who had a shocking time of it. For example Hungary and Croatia, not that long ago touted as some of the best nations in which to invest in property for British investors, saw falls of nearly 3%.

However, the results of a single quarter rarely tell the whole story. Let’s take a look at the ten nations that have seen the biggest property price falls over the course of 2010.

It’s not exactly a huge surprise to see Ireland propping up the rest of the table, with house prices falling by a whopping 14.8% so far in 2010. Ireland’s economy has gone into freefall over the last year or so, with many problems that will sound eerily familiar to British readers – an overhyped property market and a bulging public sector, followed by sharp cuts from the Government.

Dubai also stands out on that list. Property prices in the tax haven have dropped by almost 60% since its peak in mid-2008, while the bank Standard Chartered has warned that it expects prices to fall a further 5% in 2011, with property prices bottoming out there in the next 18 to 24 months. The property problems in Dubai were quite different to those experienced in the UK and Ireland, with oversupply leading to price falls.

The final nation worth noting on this list is Spain, for so long the top choice of Brits looking to emigrate for a bit of sun and sea. There have been issues with the property market in Spain for some time, which has led to significant drops in transaction numbers – home sales in October were down 17.7% year-on-year, at the lowest level on record, while boasting the highest level of unemployment in Europe (at 20%) isn’t exactly helping matters. The nation currently boasts 1.5 million empty homes, while global rating agency Fitch Ratings reckons it will be 2012 before the property market in Spain bottoms out, with prices falling 30% from their 2008 peak.

For reference it’s worth highlighting that Greece finished just outside of this top ten, with property price falls of 3.1% in the year to date.

The top performers

However, it’s not all doom and gloom. Some nations have enjoyed significant price increases over the past year. Below are the top 10 performers so far in 2010.

*Based on Beijing and Shanghai

So, some surprising names on that list, particularly Latvia, whose housing market might politely be described as turbulent. In Q3 of 2009 Latvia was actually in last place of this table, having seen property prices slump by 70% since their 2007 peak. The market has improved due to a range of factors, including Government cuts which have boosted industrial performance and relaxed immigration laws, making things a bit easier for foreign investors.

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However, it’s the Asia-Pacific region which has really enjoyed a strong 2010 thus far, with three of the top four spots and average price growth of 9.9% across the region.

However, the authorities there are attempting to cool the housing markets. In China for example, the government is focusing on increasing the amount of affordable housing available, with plans to support developers of cheap property.

Meanwhile in Hong Kong, the government has turned to additional stamp duty on properties sold within two years of purchase and larger down payment requirements for those properties at the higher end of the scale. This followed warnings from the International Monetary Fund that the Hong Kong property market was enjoying an “irrational upswing”!

And in Singapore, the government has released more land and insisted that banks demand more cash up front for property transactions, with the promise of more action should prices continue to rise.

Let’s just hope that the next time the UK experiences a sharp house price bubble, our own government at the time will be a little more hands on in managing it.

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