Global Residential Property Recovery 'Continues to Spread', Says Knight Frank Report

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While hardly a blast of optimism, Knight Frank's just-released forecast for global residential property markets points to an industry returning to some degree of normalcy.

Sixty-one percent of countries surveyed by the property company reported positive value growth from 2009 to 2010, up from 35 percent in the previous 12 months. "Data from the second quarter of 2010 suggests that the recovery is continuing to spread," Knight Frank says.

The U.K., France, Italy, South Africa and Germany should report modest 2 to 3 percent gains in 2011, Knight Frank predicts. Asia growth should slow, but Hong Kong will still see values jump by 12 percent and Singapore by three percent, the company predicts.

Although U.S. real estate is experiencing a "second wave" of difficulties, Knight Frank believes prices will remain static in 2011.

"The U.S. is one market that has actually seen pricing return to much more realistic and sustainable levels over the past three years," the report says.

Since early in 2009, prices have steadily moved up in most markets, the property company's data shows. And by mid-2010, values around the world were down an average of only 9 percent from 2006-2008 peaks.

"After a decade and a half of rising prices, which had seen growth of 100 percent, 200 percent or even 300 percent in some markets, a 9 percent decline doesn't actually seem like a catastrophe," report wryly notes.

But there are notable exceptions to the upturn. Spain, Ireland and parts of Eastern Europe are still in decline, the report found. Prices in some areas of Ireland are down 50 percent from peak periods. And Australia can only expect prices to remain flat, after 5 percent growth in 2010, Knight Frank says.

"In Australia a burgeoning economy tied into Asia's economic boom has been the driver," the report says. However, Australia is an example of a market that "stands well above long-term measures of 'fair pricing.'"

The report points to several landmines on the horizon for many markets, including rising interest rates, "government activism" and, especially, mounting debt issues, which might curtail lending.

"The biggest single theme to emerge from our assessment is the significance ascribed to debt problems--both private and public," the report says.

 

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