Overseas property markets

Global residential property prices appreciated at a slower rate of growth in Q1 2008, rising 6.1% against capital growth of 9.2% in Q4 2007 and 9.8% during the same period last year, according to Knight Frank’s latest Global House Price Index.

Bulgaria once again recorded the greatest annualised price growth, with average prices up 31.5%, while average property prices in Iceland appreciated by 19.1%.

"Bulgaria continues to confound market fears of oversupply and has so far proved immune to the deceleration seen in much of the continent (Europe)," says Knight Frank's head of research, Liam Bailey.

However, just 20% of the property markets covered in the Index recorded double digit house price growth, compared to 35% a year ago.

Bailey adds: “The Knight Frank Global House Price Index shows that while house price growth in Europe and America continues to slow or even fall, pockets of strong growth remain."

Europe:
Since Q2 2007, Bulgaria has been the best performing location in the Knight Frank Global House Price Index. While the rate of growth in the price of flats was lower than in previous quarters, it was nonetheless maintained at over 30%, again being driven by the performance of areas bordering Romania such as Ruse and Vidin, as well as the capital Sofia, where annual price inflation exceeded 60%.

Jersey has been included in the Knight Frank Index for the first time. The British Crown dependency has seen price growth accelerate to 28%. Over the last quarter, prices of property in the capital rose by nearly 10%, with the average property costing nearly £475,000.

A location where previously high rates of growth have slowed is Russia. Price inflation has fallen from an annual rate of 30% to Q4 2007 to 22% in Q1 2008. St Petersburg has continued to see growth rates outpace those in the capital.

Iceland’s economy has cooled significantly over the last year, however, the country’ sproperty market remains robust.

Sweden continued to see strong house price inflation, with the year-on-year rate of growth of 9.1% only marginally lower than that of the 10.6% observed in Q4 2007. The highest rates of growth have occurred in the north of the country, at over 13%.

Neighbouring Norway has seen growth decline significantly to the lowest rate since Q3 2003: annual growth to Q1 2008 was just 3.8%, compared to 16.4% the same period a year earlier.

House price inflation in Finland is at a similar rate to Norway and its lowest rate since Q2 2002, although the slowdown has been much less dramatic, and price inflation has less volatile over recent years.

Denmark has seen the worst performance in house price growth, with prices falling by almost 1% across the country, while the Copenhagen market saw prices fall by 10%. However, many areas are still seeing positive growth, such as Aalborg, which recorded a rise of 7% to Q1 2008.

Croatia has also seen growth moderate over the last quarter. The annual rate of growth fell to 7% from nearly 12% the previous quarter. Property in Zagreb remains marginally more expensive than coastal properties.

Other European markets outside the UK have seen a similar trend. Spain continues to take a battering in the press, despite having seen one of Western Europe’s strongest performances of 3.8% annual growth. However, this is the lowest rate of price inflation since 1997, and there are undoubtedly serious concerns over the Spanish housing market and its impact on the Spanish economy.

Neighbouring Portugal appears to have escaped the market boom and bust cycle that has afflicted Spain: the highest growth rate seen in residential property prices over the last 12 years was 8.7% in 1999. After seeing slowing growth in late 2006 through to early 2007, price growth picked up in Portugal in the year to Q1 2008 to reach 3.8%.

After a fairly dramatic appearance on the Knight Frank Index in the fourth quarter of 2007, price growth in Poland has slowed significantly, with annual rates to Q1 2008 at 3%, a sudden reversal of fortune from the 22% observed to Q4 2007. The price of houses has been rising faster than the price of apartments, which in some locations have seen price falls. The rapid rate of apartment construction in recent years means that across the country there is a shortage of houses, which consequently hold their value better than property in the oversupplied apartment sector.

The residential market slowdown occurring in much of Europe has not bypassed France. The price boom that occurred in France over a four year period from 2002 to early 2006 definitely appears to be over. The rate of annual price growth to Q1 2008 slipped to 2.5%. The greatest growth – 4.8% - was recorded in the South East. The lowest capital growth occurred in Central and Alpine France, up 1.4%.

Property prices in Germany fell by over 5% on a year on year basis. However, the new build residential property prices are not falling as fast as those for resale property.

Austria has also seen price growth slow, although the 1.2% annual growth nationally to Q1 2008 hides marked regional disparities. Growth in Vienna accelerated during the latter half of 2007, rising from 4% in the summer to 5.4% to Q1 2008.

In Hungary, property price growth has been below 4% since early 2005, and the latest quarters figures are no different, with annual growth of 1.2%.

Switzerland’s stable growth in house prices continues, albeit at the extremely low rate of 0.4%, lower than the current rate (1%) of CPI inflation. The peak of Switzerland’s housing market cycle occurred at the end of 2002, where price inflation reached a dizzy 5.5%.

The UK housing market is experiencing its most significant slowdown since the early 1990s, with prices in Q1 2008 approximately 1.1% below their values last year.

The dramatic reversal of fortune in the Baltic markets towards the end of 2007 is still reflected in Q1 data. The price of apartments in Riga, the Latvian capital fell by nearly 6% during the quarter, marginally less than the decline in prices observed during the previous two quarters. The annual decline in prices reached 20% with prices per m² falling to just under €1,400, down from the €1,700 peak reached in Q2 2007.

Estonia is also continuing to see apartment prices fall, the 11% decline in values to Q1 2008 was marginally less than the 14% drop seen to Q4 2007. Over the quarter values fell by around 3%.

Lithuania remains the most stable Baltic market with a price rise of 0.5% over the course of the year.

In Ireland house prices have continued to fall. Nationally prices across the country fell by nearly 9% over the year to Q1 2008, an acceleration of the 7.3% decline observed in the previous quarter.

Asia Pacific:
Singapore’s property price growth has slowed marginally during the last quarter. Annual growth to Q1 2008 was 29.9%, down from the 31% increase of the previous quarter.

Hong Kong’s price growth has crept up to rival that of Singapore, recording nearly 29% growth in the year to Q1 2008.

In China, property prices house prices in 70 cities rose 11.7% year-on-year in the first quarter: 0.8% higher than the growth recorded in the previous quarter.

Over the 12 months to Q1 2008 Australia recorded annual house price growth of 13.8%, compared to 8.6% for the 12 months to Q1 2007, moving its Global House Price Index ranking up six places.

The Americas:
In the United States, the Knight Frank Global Index shows a house price decline of -0.03%, although the OFHEO data based on all transactions including mortgage refinancing is less pessimistic and volatile than other US house price indices. California and Nevada led the way in terms of house price deflation, with prices decreasing by 10.6% and 10.3% respectively. The Midwest states of Wyoming and Utah led the market with growth of 6.3% and 5.6% respectively.

Canada has seen a slowdown in the rate of house price inflation over the 12 months to Q1 2008. House price inflation has more than halved from Q1 2007 to Q1 2008 from 12.6% to 6.1% and moving down three places in the Knight Frank Global House Price Index. Despite Canada’s slowing house price inflation at a national level, some areas are still performing extremely strongly. In Saaskatoon, house prices rose by almost 50% to Q1 2008, whilst in Regina, and in Winnipeg, prices rose by 28% and 15% respectively. Vancouver saw price growth akin to the national average, with 6.1% over the 12 month period.

Africa:
South Africa saw house price inflation of 8.8% over the 12 months to Q1 2008, a noticeable slowdown from the same period a year earlier which revealed growth of 13.6%. Political instability in the region, particularly in Zimbabwe and Kenya, may adversely affect any international investment in South Africa