The international real estate research house Global Property Guide present their new findings that confirm 2008 house prices falls and some predictions for 2009. Interestingly the report covering the major overseas property destinations shows that the entire world’s property markets now move in a synchronized manner
House prices fell by more than 10% in the UK, the US and Ireland during the year to end-Q3 2008. House prices also fell in Austria, Japan, Luxembourg, Israel, Norway, Malta, New Zealand, and Portugal. Although the latest figures are not yet available, house price falls are also expected in economic powerhouses such as France, Italy, Germany, South Korea and Russia.
House price falls in Europe are widely anticipated to worsen, including those in Estonia, Latvia, Slovenia and Greece.
When house prices are adjusted for inflation, countries with house price declines include South Africa, Iceland, Indonesia, Finland, Spain, Sweden, Australia, Canada, the Netherlands , and the Philippines.
Compared to the previous quarter house prices have also fallen in Hong Kong and Singapore in Q3 2008, which saw strong rises late last year
The core of the crisis is the United States, where house prices fell 20.75% during the year to end-Q3 2008 in inflation-adjusted terms according to the Case-Shiller house price index. This was after a 6.62% fall during the same period last year. Prices in many regions, such as Arizona, Nevada, California and Florida, have fallen much more.
In the United Kingdom, house prices fell 14.44% during the year to end-Q3 2008 in inflation-adjusted terms, after rising 7.59% during the same period last year.
House price falls in the UK seem to be accelerating. The figures show house price declines of 6.67 % (inflation-adjusted) during the latest quarter in the UK. This is the largest quarterly fall among the countries where data is available.
Ireland saw its second year of falling house prices, with a decline of 13.74 % in inflation-adjusted terms, after a 6.38% fall last year.
House prices were significantly up on the year to end-Q3 in Slovakia and Bulgaria. But in each case, prices were stagnant or fell slightly during the latest quarter, in inflation-adjusted terms.
Synchronized housing markets
The entire world’s property markets now move in a synchronized manner, highly affected by the US economy and US interest rates. This is the culmination of a process which began in 1971, with the end of the Bretton Woods fixed exchange rate system.
The global housing slump comes on the heels of a decade-long house price boom, unprecedented in terms of synchronicity and magnitude, caused mainly by loose monetary conditions. Now that global credit markets are frozen, housing markets around the world are suffering.
Housing markets around the world can broadly be classified into two: 1) those where house price falls led to economic recession and 2) those where the global economic slowdown led to house price falls. The first group include countries such as the US, the UK, Ireland, Spain and Estonia. These countries suffered from excessive house price bubbles which triggered the global credit crunch and a financial meltdown.
Housing markets in the second group, on the other hand, have stronger economic and financial market fundamentals. Their economies and housing markets suffered mainly from contagion and the confidence crisis which have afflicted almost all housing markets. These countries include Canada, the Netherlands, and Norway.
Nevertheless, there are several countries which cannot be classified into the two groups above. There are countries with structural problems in their economy, the housing markets and/or the financial system, making them vulnerable to external economic shocks. These problems were magnified with the global financial meltdown. They include Japan, South Korea and Germany.
Source: Global Property Guide
