By Ian Cowie Your Money Last updated: December 2nd, 2011
House prices could soon start to fall around the world as a result of the credit crunch and eurozone crisis, one of the biggest global estate agents has hinted.
Knight Frank, which operates in 43 countries, across six continents and claims to have sold property worth US $817bn or £498bn last year, can scarcely be accused of talking the market up. It reckons the average house price edged higher by only 1.5pc last year – little more than the margin for error across such a large sample.
The Knight Frank Global House Price Index includes fast-growing emerging markets where double digit increases were widespread until recently, but even these constituents showed more sluggish growth in the third quarter of this year.
As a result, the index remained flat for the last three months. Residential analyst Kate Everett-Allen said: “Looking forward, house prices are likely to show little improvement in the final quarter of 2011, given that much of the unravelling of the eurozone sovereign debt crisis took place post-September and has yet to be reflected in the index results.”
More than half the 51 countries covered by the index – which is based on government or central bank statistics – showed falling house prices during the last quarter. Hong Kong topped the global property table, with house prices 19pc higher than a year ago. The only other countries to deliver double digit gains over the same period were Estonia (14pc);India (14pc) and Taiwan (13pc). Mainland China lagged in sixth place with growth of less than 9pc with fears of house prices falling by 20pc next year.
At the other end of this year's global index, Ireland showed house prices falling furthest. The average was more than 14pc lower than a year ago,with some properties being offered for auction with asking prices of only £18,000. Russia was second from bottom of the table with prices nearly 11pc lower, following Ukraine (-8pc) and Cyprus (-7pc). The latter Mediterranean island is popular with many British pensioners because of low rates of income tax on retirement income.
Britain ranked 30th in the table with an annual decline shown as just 0.5pc, despite this week’s figures from the Land Registry, based on tax paid by homebuyers, that show prices fell by 3.2pc. Britain’s sovereign status outside the eurozone has not protected it from global economic gloom. Ms Everett-Allen said: “With politicians seemingly helpless to get to grips with the eurozone debt crisis, this has reawakened fears of a double dip recession, not just in Europe but around the world. Unsurprisingly, this economic uncertainty has been reflected in the performance of the world’s housing markets.”
America ranked 39th in the table with an average decline in American house prices shown at 3.9pc. Obviously, the average price changes conceal wide variations at either extreme. Knight Frank’s research suggests luxury property is holding its value better than more modest homes, as the global rich continue to regard property as a safe haven for capital preservation while the squeezed middle and poorer people bear the brunt of tax hikes and government spending cuts.
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