How house prices changed around the world in 2012

Since our housing bubble burst in the summer of 2007, prices have fallen back in most parts of the UK, with London bouncing back strongest.

In November 2012, the average UK home cost £160,879, according to the Halifax House Price Index. This figure is virtually unchanged compared to the average £161,017 recorded a year ago in November 2011.

As a result of steep falls in 2007/09, the average home today costs roughly the same as it did in July 2004. Thus, house prices in most parts of the UK have rolled back to where they were nearly 8½ years ago.

House prices around the world

We know that house prices have been weak in the UK since the arrival of the credit crunch, but how have they fared in other countries? To find out, I checked the latest global house-price survey produced by The Economist magazine. Here's what it reveals:

Where house prices have risen the most in 2012

Source: The Economist, 18/08/12

Where house prices have fallen in 2012

Source: The Economist, 18/08/12

Global house prices in 2012

Nine countries experienced a rise in average house prices while 12 others saw a drop.

The best-performing property market over the last 12 months has been Austria, where prices rose by 11% on average. The surprising Germanic leader shows how subdued the rest of the world market has become as nations try to regain control of spiralling house prices.

[SPOTLIGHT]In second place was Hong Kong – a 'tiger economy' of the Far East -- where prices rose by 6.4%. The pace of price rises in this part of the world has slowed to a more sustainable level compared to the 17.5% rise recorded in the last survey.

South Africa (-1.3%), China (-1.4%) and Sweden (-3.7%) have fallen out of the nations with rising house prices to join the list of those experience plummeting values. The fall for China might be a bit surprising for a growing economy, but is the result of conscious efforts by the Chinese Government to make house prices more realistic.

The biggest drops over the past 12 months were found in Ireland (-14.4%), Spain (-8.3%) and Denmark (-6%), all of which are going through painful economic contractions.

Ireland’s property market has been in free-fall since 2010 and the average property price today is half the value it was in 2007. From 1995 Irish property experienced a five-fold rise that peaked in 2007, so the market has had to fall from a great height and it looks like it still has some way to go even though the pace has dropped off compared to last year.

In contrast the pace of decline in Spain has gained momentum according to this year’s results, rising from a 5.5% fall to 8.3% this year. According to the Economist although prices have already fallen by 23% from their peak, they remain well above fair value and with massive unemployment, prices are expected to keep diving. 

Now let's see how house prices have fared since the credit crunch sent shockwaves through financial markets:

Where house prices have risen since 2007 

Source: The Economist, 18/08/12

Where house prices have fallen since 2007 

Source: The Economist, 18/08/12

Global house prices since 2007

There are 12 gainers and nine losers in these tables. As you can see, this second table is broadly similar to the first: again, Hong Kong and Austria lead the way for rising values, with Ireland and Spain high up for falling prices.

Prices in Hong Kong seem unstoppable, up nearly two thirds (63.6%) in five years. Austria’s success is also impressive, with prices up well over a fifth (23.1%) since 2007. Singapore (21.1%), Switzerland (20.9%), China (17.8%) and Canada (17.8%) follow with sizeable increases in property value. However, set against a struggling world economy, these countries could face problems to come, with emerging property bubbles pumped ready to burst.

Europe's two biggest economies, Germany and France, have seen prices rise modestly in the past five years, up 7% and 0.9% respectively.

The three worst-performing markets since 2007 are those of Ireland (-49.8%), the USA (-27.8%) and Spain (-22.4%). All of these markets were massively overvalued at their peaks and have since come crashing back down. In Dublin and certain US cities, prices for top-end properties have more than halved, clearly showing how insanely high they climbed in the Noughties.

The USA has seen prices fall significantly and as a result more than four million have lost their homes. Currently the property market is 19% below ‘fair value’ but The Economist indicates the free-fall may come to end soon as house sales have picked up, repossessions are down and mortgage finance remains cheap. Property prices only fell 0.7% this year compared to 5.9% last year.

According to the wise heads at The Economist, Britain’s price fall of 10.2% was rather ‘modest’ and Europe has been ‘cushioned’ from worse effects by low interest rates. London and the south east were pinpointed as propping up Britain with 47% of residential transactions taking place here in 2011. London is the only region in the UK to regain property value to pre-credit crunch levels.

What next?

Overall the tone of the report was positive.

The Economist said that: "A big dose of gravity has hit residential-property markets around the world" and these "earthbound prices are returning many markets to “fair value”".

But the report revealed that housing is now around or below its fair value in only eight of the 21 countries surveyed, so there is still a long journey ahead for some nations.

More on house prices:

Why house prices won't recover until 2024

Rightmove: north-south divide in property asking prices continues

What to do when a home survey goes wrong

How rows with your neighbours could hurt your house price