House Prices Falling on Global Scale

House Price Crash Stats

An article in the UK’s Guardian has highlighted a global phenomenon in the house price crash that began in the US and spread across the globe, this according to international estate agents Knight Frank, which also indicated that there are steep declines taking place in Europe and Asia at the moment.

The country recording the worst fall in house prices seems to be Latvia, where figures stand at a plummet of 24.1% over the past year. New Zealand, Denmark and Lithuania have all experienced price declines, along with Malta, Germany, Ireland, Estonia, Britain and the US. Even countries that have not seen a dramatic fall in prices are witnessing a rapid deceleration in price growth.

The article mentions that South Africa’s rate of house price inflation has collapsed from 15.5% at the same time last year to just 3.8% today and is expected to be negative soon. In countries like France, Spain and Greece, price growth has literally halved and is recorded at less than 3.2%.

Russia was the fastest growing market last year, with an unbelievable house price growth of 53.7% in the second quarter of 2007, but this has since fallen back to 26.5%. According to Nick Barnes, head of international research at Knight Frank, “The index shows that global house price inflation is continuing to fall back, with much of continental Europe now seeing low or negative growth. Housing markets in countries such as Spain, Denmark, the UK and Ireland are all being severely challenged by the global credit squeeze”.

In the long-term, the rate of global house price growth fell to 4.8% in the second quarter of 2008, which is down from 6.1% in the first quarter of this year. There are a number of countries that are now entering their second year of house price declines and Germany is among the worst hit, with a falling rate of 4.4% last year and 2.5% this year.

Barnes says, “There is less demand for owner-occupied property in Germany than in many other European countries and there is no shortage of supply”. In Spain, the Knight Frank index reflected a price rise of 2.4% annually, but it warned that falls in house prices are now almost inevitable.

“The well-publicised problems in Spain have not yet fed into house price statistics. So far, price falls have been concentrated in the coastal resorts and among new developments in the large cities,” Barnes indicated.

“Spain looks likely to fall into recession later this year and house sales fell steeply during June. The number of sales dropped by 34.2% in May and 29.6% in June, suggesting that wider price falls could be imminent”.

However, investors who have bought second homes in Bulgaria have plenty of reason to feel bullish. According to Knight Frank, the current annual house price growth is 32.2%, which is only slightly lower than the 33.7% recorded in the first quarter of the year.

Biggest fallers in 2008:
Latvia 24.1%
United States 16.8%
Estonia 16%
Lithuania 9.9%
Denmark 9.6%
Ireland 8.1%
UK 3.9%
Malta 2.7%
Germany 2.5%
New Zealand 2.2%

The information in this article is courtesy of Patrick Collinson (“House price crash goes global”, Guardian, 2 September 2008).

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