Property Price Indicators Increasing Globally

Posted by admin on October 14, 2009 under Uncategorized | Be the First to Comment

LONDON – Oct. 14, 2009 – Real estate markets worldwide are stabilizing and showing signs of a tentative recovery, according to a newly released report from London-based global property consultancy Knight Frank.

The quarterly Knight Frank Global House Price Index shows property values increasing in almost half of 32 countries surveyed during the second quarter of this year. “Significantly, quarterly price falls accelerated in only 22 percent of the locations and did not exceed 10 percent in any country,” says Liam Bailey, head of residential research for Knight Frank. “This compares with double-digit falls in a number of locations during the first quarter.”

Some of the strongest signs of recovery are coming from the Nordic countries, with prices up over the previous quarter by 5.3 percent in Norway, 3.9 percent in Finland, and 3.6 percent in Sweden. But countries as diverse as Australia, Israel, and the Netherlands also are posting solid gains.

In some places, demand is being spurred by historically low borrowing costs and homebuyer tax incentives. Sweden’s central bank, for example, has slashed the prime interest rate from 3.75 percent a year ago to only 0.25 percent today, so banks there are now offering home loans at interest rates as low as 1.5 percent.

Interest rate reductions by the Bank of England, coupled with a relatively tight supply of housing in Britain, has reignited the market there as well, sending prices up 1.1 percent in the second quarter after five consecutive quarters of price drops.

Housing market is still fragile

The market is even starting to rebound in the U.S., where the subprime mortgage crisis originally began. U.S. home prices rose 1.3 percent in the second quarter, following declines of 7 percent in each of the previous two quarters. Even hard-hit regions such as California are starting to recover.

But worries still linger. Credit remains constrained as the global economy struggles to recover, and many countries still have an excess supply of unsold property, putting downward pressure on prices. Despite the positive signs in the second quarter, prices in most countries remain lower than a year ago, and Knight Frank says the market is still fragile.

What’s more, super-low interest rates won’t last forever. “One could even say that house prices are now artificially boosted by low mortgage rates,” says Magnus Lange, a partner in the Stockholm office of real estate brokerage Cushman & Wakefield. “I’m expecting to see [Swedish] house prices fall by 15 percent in the year ahead, once banks raise their interest rates.”

And some countries are still basket cases. Bulgaria, where the real estate market once boomed on sales of vacation homes to wealthy Russians and Europeans, saw second-quarter prices fall 9.7 percent, on top of a 12.4 percent decline during the first quarter.

Copyright © 2009 by The McGraw-Hill Companies Inc., Leona Liu. All rights reserved.