Results for Q3, 2011
- The Knight Frank Global House Price Index rose by just 1.5% in the 12 months to September
- During the third quarter of 2011, house prices fell in 54% of the countries monitored by the index and average price growth was zero
- Hong Kong has been the strongest performer. House prices have risen 19% in the past 12 months
- Prices in Ireland have fallen the most -14% in the past 12 months
- Europe is the weakest performing world region. Prices fell on average by 0.5% in the past 12 months
Knight Frank: Global housing market stagnates
The Knight Frank Global House Price Index, which tracks the performance of the world’s mainstream housing markets, showed zero growth in the three months to September. This was the index’s weakest performance since Q2 2009 and raises fears that it could enter negative territory by the end of the year.
The third quarter saw mounting pressures on the global economy with politicians seemingly helpless to get to grips with the Eurozone debt crisis. This has reawakened fears of a double dip recession in Europe and around the world. This economic uncertainty has been reflected in the performance of the world’s housing markets with average annual growth now stands at just 1.5%.
The East/West divide in price performance, evident since 2008, is now starting to fade as the deflationary measures applied by policy makers in Asia start to take effect. Average annual price growth in Asia has fallen from 15.2% in Q1 2010 to 6.9% in Q3 2011.
Portugal, Ireland, Italy, Greece and Spain see data from the last three months suggesting their housing markets may be over the worst, despite the economic turmoil they are facing. Although prices in all five housing markets continued to fall, the pace of decline slowed in all but Portugal.
By contrast, however, the latest results from our index suggest that house price growth in some of the world’s fastest-growing economies is running out of steam. On average, these countries recorded price rises of just 0.9% in the past three months.
Looking forward, house prices are likely to show little improvement in the final quarter of 2011 given that much of the unraveling of the Eurozone sovereign debt crisis took place post-September and has yet to be reflected in the index results.
As highlighted in our recent forecast, luxury housing markets appear to be better insulated from this new weaker phase than mainstream markets, partly due to the scale of global wealth generation, the ongoing search for “safe-haven” investments and the growing divide between the prime markets in the West and the rest of the world.
Data digest
The Knight Frank Global House Price Index established in 2006 is the definitive means for investors and developers to monitor and compare the performance of mainstream residential markets across the world. The index is compiled on a quarterly basis using official government statistics or central bank data where available.