Global house prices rose by a modest 2.8% in 2010 as more markets recorded negative growth in 4Q2010, according to the Knight Frank Global House Price Index 4Q 2010 results.
Price growth was led by Asia Pacific (7.5% annual growth), followed by the Middle East (5.3%) and South America (3.8%). However, about 41% of markets surveyed recorded negative growth in 4Q2010 compared with 35% of markets in 3Q and 31% in 2Q.
More European countries and markets in the US demonstrated weakness in the second half (2H) of last year after a “brief revival” in the last 12 months, observed Knight Frank’s head of residential research Liam Bailey.
“The key trend at play in the global market is the unwinding of the stimulus packages put forward in 2009 in Europe, North America and Asia-Pacific.
“This trend is being reinforced by weaker results from Asia-Pacific, with India, Taiwan and Japan all recording negative price growth in the second half of 2010,” he said.
In 3Q2010, the house price index showed India, Taiwan and Japan declining by 1.7%, 1% and 0.8% respectively. Meanwhile, the three markets recorded an annual change of 8.9%, 7.4% and -3.6% and a six-month change of 5.6%, 2% and -1.6% respectively.
“The impact of ‘hot money’ created by quantitative easing may be dissipating, especially in Asia – where the 30%, 40%, 50% and even higher annual rates of growth, which were common in some Chinese and Indian cities a year ago, have now cooled considerably,” he explained.
Meanwhile, the fastest risers in the index were Hong Kong (20.1%), Latvia (16.9%) and Israel (16.2%). Hong Kong’s rising prices have caused the government to impose measures to curb speculative price growth, while Latvia’s market is rebounding following a 70% plunge in prices during the credit crunch. Israel is enjoying a boost from foreign investors. Malaysia recorded a minute 0.9% growth in 3Q, and saw an overall annual and six-month growth of 6.2% and 3.4% respectively.
Bailey opined that Asian markets will more likely to sidestep a crash in prices, but in many of the previously ‘hot markets’ price falls this year are a “realistic assumption”.
The ultra-low interest rates representing the last traces of the stimulus packages in the European and US markets are deemed critical to the ongoing security of the market, said Bailey.
“Across Europe and the US the lack of bank lending is likely to extend the recent period of price reversals,” he said.