Global house price rises begin to slow

Published 07th Dec 2010

The increase in house prices seen across the globe over the past 12 months is dropping off, with the annual rate of inflation falling to 3.1% in the last quarter, a survey says


The rise in global house prices is slowing down, with average annual house price growth around the world falling to 3.1% in the third quarter of the year, down from 4.3% in the previous quarter, a survey shows.

Knight Frank's global house price index shows the weakest region in the three months to the end of September was Europe, posting 0.8% house price growth, while Asia-Pacific was the strongest with average growth of 9.9%.

For the first time since late 2008, quarterly prices increased in each of the six world regions monitored by Knight Frank (Asia-Pacific by 9.9%, Middle East by 5.1%, North America by 4.2%, South America by 3.5%, Africa by 3% and Europe by 0.8%).

But annual growth in Europe ranged from 26.1% in Latvia to -13.9% in Lithuania and -14.8% in Ireland, while average house prices in the US now stand at their mid-2003 level, according to the estate agent.

It said the critical driver for weaker global performance was the number of countries "tipping back into negative growth" in the most recent quarter, with 14 (mainly European) countries notching house price falls.

Liam Bailey, head of residential research at Knight Frank, said there is now a growing gap between the less debt-afflicted European economies of Austria, France and Finland and their neighbours to the south and west of the continent, with Greece, Spain and Ireland ranking much lower in its global house price index.

"While a majority of countries are reporting positive annual growth, 56% saw prices fall in the third quarter this year," Bailey said. "There is growing evidence that the global housing market recovery, which began in early 2009 following the desperate conditions in 2007 and 2008, may just be beginning to run out of steam.

"Nearly a third of countries which had experienced strengthening conditions in [early] 2010 saw quarterly price growth turn negative in the third quarter of 2010."

Led by European markets, the list of countries recording average house price falls includes Greece, Iceland, the Netherlands, Norway, Portugal, Slovenia and the UK. Outside of Europe the list includes China, Canada, Colombia, Dubai, New Zealand, South Africa and Taiwan.

Expensive consumer locations

However, despite the global slowdown in house price inflation, homeowners and consumers must cope with the rising costs of everyday goods, according to shopping website PriceRunner. It said the cost of such items have risen internationally over the past year. It said the cheapest city in the world is Mumbai, with prices 27% below the global average, followed by Bangkok and Dubai as the second and third cheapest, with prices 19.8% and 16.2% respectively below the world average.

London slipped down the list of most expensive cities in the world, from second in 2007 to eighth this year, according to the group's international price comparison survey, which compares a range of products across 32 countries.

Oslo was found to be the most expensive city for the fourth successive year. In the city a can of Coke will set consumers back £1.80 (56p in UK), while a litre of milk costs £1.56 (80p in UK) and fast-food fans must shell out £4.70 for a Big Mac (£2.39 in UK).

Across the 32 countries the price of some everyday purchases decreased (such as a pint of milk falling from 86p to 81p, and a can of Coke dropping from 75p to 56p). Many items have increased dramatically including coffee (from £1.63 to £2.50), cinema tickets (from £8.90 to £9.62) and condoms (from £6.63 to £8.99).

Marc Thomas, UK manager for PriceRunner, said: "London is seen by many as an expensive holiday option, but if you're choosing to shop in Europe it is still relatively cheap. Many retailers are maintaining their low prices across tech and gadgets in a bid to kick-start the economy.

"Consumers should enjoy the lower prices now before the VAT increase kicks in at 20% in 2011. With many other EU countries also raising their VAT, next year's results should make for interesting reading."

Source: ' Guardian '

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