Global Housing Markets Stagnate in 3Q, Dip to Mid-2009 Performance Levels

Residential News » Residential Real Estate Edition | By Michael Gerrity | December 1, 2011 8:50 AM ET

According to London-based real estate firm Knight Frank, 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, not just in Europe but around the world. Unsurprisingly, this economic uncertainty has been reflected in the performance of the world's housing markets.

The boom conditions experienced between 2004 and 2007 when global housing markets recorded double-digit annual price growth for 16 consecutive quarters are a distant memory. Average annual growth now stands at just 1.5%, despite rises of up to almost 20% in some Asian countries.

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.

Despite the turmoil facing the PIIGS economies (Portugal, Ireland, Italy, Greece and Spain), data from the last three months suggests their housing markets may be over the worst.

Global Housing Results for Q3

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

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 - the EAGLES 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 Knight Frank's recently published Prime Global Forecast highlights, luxury housing markets appear to be better insulated from this new weaker phase than mainstream markets. This is due in part 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.