Economic woes and political uncertainties depress global house prices

House prices in major economies across the world increased by an average of 3.4 per cent in the year to the end of March, according to Knight Frank’s Global House Price Index for the first quarter of 2016.

Houses in San Fransisco
The estate agents reported that prices in the US and UK were "treading water", partly because of upcoming political events – the presidential election in America and the EU referendum in Britain.Meanwhile, previous top performers such as Turkey and Australia were seeing a slowdown in the pace of price growth while Asian markets were "struggling to find traction".Kate Everett-Allen, who heads international residential research at Knight Frank, added, “Economic headwinds still persist in the eurozone. Twelve of the bottom 20 rankings are occupied by European countries and of these, nine are members of the eurozone.”The report identified Sweden "as one of the index’s few engines of growth". It said, "Some Nordic countries, together with some Baltic states, stand out as rare hotspots. At 12.8 per cent, annual price growth in Sweden is not far behind Turkey and prices stand 48 per cent above their low in the first quarter of 2009."Heading east, Asian markets are stumbling. Singapore, Hong Kong and Taiwan have all seen prices decline by between 3-6 per cent in the year to March 2016. A combination of sluggish economic growth, regulatory measures and new supply are restraining price growth."The index, which tracks house prices across 55 housing markets, placed Turkey at the top of its rankings for price growth although the annualised rate had declined from 18 to 15 per cent from the last quarter of 2015."Security concerns, Russian sanctions and mounting pressures on the (Turkish) lira are curtailing investment despite high demand and low supply characterising the wider property market," said the report."Other strong performers, such as Australia and New Zealand, have also seen price growth moderate. Despite Australia’srecent rate cut to 1.75 per cent, prices are unlikely to keep growing at the same rate given mortgage debt is at a record high relative to income and December 2015 saw the introduction of new fees for foreign buyers."In the UK and US, the index showed that price growth in the first three months of 2016 equated to 0.9 per cent and 1.6 per cent respectively, "linked in part to political worries".The report added, "Aside from Turkey, emerging markets have seen prices enter a period of flat or low growth since mid-2014. The BRIC nations recorded annual price growth of three per cent on average in the 12 months to March – four years ago this figure was closer to 11 per cent."Capital flight, currency shifts (partly due to US rate rise), volatile equity markets and slowing wages are hampering demand."

 

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Read more about how the UK economy is weathering seismic changes from around the world including the uncertainty over Brexit in David Sapsted’s analysis and look out for more in our Summer 2016 edition of Re:locate magazine.