Global property markets in “full bloom”, as Dubai dominates

Inflation-adjusted figures from Global Property Guide show that property values grew in 28 of the 42 housing markets which have so far released statistics this year, a trend that has been hailed as “the most significant global acceleration in house prices since the boom years of 2006/7”.

The nominal figures show the depth and breadth of the boom: in the first quarter of 2013, nominal house prices rose in 30 countries, and fell in only 12 countries.

The great US recovery

In the United States, house price rises accelerated in Q1 2013, despite a weakening economy. The S&P/Case-Shiller seasonally-adjusted national home price index soared by 8.31% during the year to end-Q1 2013, the biggest year-on-year increase since Q1 2006.   Quarter-on-quarter, the national home price index rose by 3.3% in Q1 2013. The housing recovery was led by Phoenix, but all of the 20 U.S. major cities registered strong year-on-year house price increases in Q1 2013

The FHFA’s house price indices were also encouraging. The U.S. seasonally-adjusted purchase-only house price index rose by 4.93% year-on-year to Q1 2013, its fourth quarter of year-on-year gains and the highest growth seen since Q2 2006. On a quarterly basis, the index increased by 1.32% quarter-on-quarter in Q1 2013.

Demand is rising sharply. The total number of houses sold in the country increased by 26.4% year-on-year in Q1 2013, to about 153,000 units, based on figures from the U.S. Census Bureau.

Residential construction activity is picking up. In Q1 2013, the number of house building permits authorized soared by 20.3% year-on-year, to 205,500 units. U.S. home builder sentiment rose 7.3% from the previous year in May 2013, according to the National Association of Home Builders.

Foreclosures and home repossessions are falling. During the year to April 2013, the total number of foreclosures completed in the U.S. dropped 16% to 52,000 units, while the foreclosure inventory fell by 24% year-on-year to about 1.1 million homes, according to CoreLogic, a data analytics firm. Lenders repossessed 34,997 houses in April 2013, the lowest level since July 2007, according to foreclosure listing firm, RealtyTrac Inc.

“These encouraging figures are partly due to increased efforts by the government and state lawmakers to delay property seizures,” explains Global Property Guide. “In California, a new law prohibits lenders from pursuing foreclosure while the borrower is still renegotiating his loan terms.”

Canada’s cooling

Canada’s housing market is now slowing sharply, mainly due to the government’s several rounds of housing market cooling measures and the slowing economy. During the year to end-Q1 2013, house prices in Canada’s eleven major cities rose by 1.58%, the lowest year-on-year increase seen since Q2 2011. House prices actually dropped 1.48% quarter-on-quarter during the latest quarter.  

Despite many predictions of a disastrous crash, the government maintains its positive outlook.

Good news in Europe

There is good news even in Europe. Of the 25 European housing markets included in Global Property Guide’s survey, 14 performed better in Q1 2013 than the previous year while only 11 showed poorer performance.

Turkey had the fourth highest house price rises in Global Property Guide’s global survey. In Turkey, house prices rose by 8.13% during the year to Q1 2013, in sharp contrast with the 1.55% year-on-year decline seen in the same period last year. However, house prices dropped by 1.09% during the latest quarter.

The Turkish economy grew for the fourteenth consecutive quarter, with real GDP growth rate of 3% in Q1 2013 from a year earlier, according to the Turkish Statistical Institute (TurkStat).

Denmark’s house prices are also rising strongly. The price index of owner-occupied flats increased by 7.01% year-on-year in Q1 2013, after annual growth rates of 6.84% in Q4 2012 and 3.25% in Q3 and declines of 4.12% in Q2 and 5.52% in Q1. House prices rose by 3.25% during the latest quarter.

Other strong European housing markets included Norway, with house prices rising by 4.75% during the year to Q1 2013, Estonia (4.2%), Poland (3.24%), Sweden (3.11%), and Switzerland (2.42%). All saw house prices rise during the latest quarter (2.38% for Norway, 2.14% for Estonia, 4.81% for Poland, 0.69% for Sweden and 0.97% for Switzerland).  

Some European housing markets also saw minimal house price increases. This category included Iceland, with house prices rising by 0.59% year-on-year in Q1 2013, Romania (0.52%), Riga, Latvia (0.3%), and Finland (0.29%). All these, except Iceland, performed better during the year to Q1 2013, compared to a year earlier.

The weakest continent

Despite this improvement in Europe, the 13 weakest housing markets in Global Property Guide’s survey were all in the troubled continent:

Greece remains the world’s weakest housing market in Q1 2013. The Greek economy is now suffering from a prolonged recession, amidst falling consumption and investment, exacerbated by the government’s austerity measures. The economy is expected to contract further by 4.2% in 2013, after shrinking 6.4% in 2012.

House prices dropped 11.53% during the year to Q1 2013, a slight improvement from the 12.01% year-on-year drop seen in Q1 2012.

The Netherlands comes second on the list of the world’s worst performers. House prices fell by about 11% during the year to Q1 2013, the nineteenth consecutive quarter of year-on-year house price falls.

Spain’s housing market downturn continues as well. Spanish house prices plunged 10.24% year-on-year in Q1 2013, the third worst performance in Global Property Guide’s global survey. However during the latest quarter, Spanish house prices actually increased by 0.28%. The economy is expected to contract by 1.6% in 2013.

Croatia recorded the fourth highest house price falls. The average price of flats in Zagreb fell by 9.53% year-on-year in Q1 2013, the steepest decline since Q4 2009. During the latest quarter, house prices dropped 3.12%. Croatia is already on its fifth year of recession. The economy is expected to contract by another 0.2% in 2013, from an annual decline of 2% in 2012.

Russia’s housing market performance remains miserable, despite robust economic growth. In Russia, house prices dropped by 8.09% during the year to Q1 2013, the steepest decline since Q1 2011.

All five worst-performing housing markets, except Greece, saw bigger house price falls this year than during the previous year.

Some European countries saw their house price declines decelerate, though. These included Portugal, with house prices falling by -7.18% during the year to end-Q1 2013, Bulgaria (-4.52%) and Ireland (-3.51%).  

Asia on the up

Asia, though, remains positively buoyant.

Of the nine Asian housing markets included in the survey, eight saw house prices rise during the year to Q1 2013 – only two countries performed more poorly during the year to end Q1 2013 than the previous year.

Hong Kong saw the world’s second highest house price rises, with house prices surging 20.14% year-on-year in Q1 2013, far higher than the 2.11% annual increase seen during Q1 2012.

Housing completions in 2012 rebounded to 10 150 units, up by 7% from the previous year, according to the Rating and Valuation Department (RVD). Completions in 2013 and 2014 are expected to rise to 13 550 units and 15 820 units respectively.

Hong Kong’s economy expanded 2.8% in Q1 2013 from a year earlier.

House prices in Delhi, India, rose by 7.61% during the year to Q1 2013, from a year-on-year increase of 6.05% in Q4 2012. Delhi house prices rose by 1.39% during the latest quarter.

In Beijing, China, the price index of second-hand residential buildings rose by 5.92% during the year to Q1 2013, in sharp contrast with the year-on-year decline of 1.27% in Q4 2012. House prices increased 4.52% during the latest quarter.

In Greater Taipei, Taiwan, house prices rose by 3.24% during the year to Q1 2013, in sharp contrast with the 0.38% year-on-year decline seen in the same period last year. House prices increased by 2.68% during the latest quarter.

Other Asian housing markets which saw modest year-on-year house prices increases in Q1 2013 include the Makati CBD, Philippines (2.34%), Tokyo, Japan (2.12%), Indonesia (2.04%), and Thailand (1.48%).

Pacific improvements

New Zealand has also stayed strong, with sales in Q1 2013 climbing 12.1 per cent year-on-year, pushing prices up by 7.23 per cent annually. Christchurch’s rebuilding from the devastating earthquake has helped the economy recover, with the country’s economy expected to expand 2.7 per cent in 2013 by the IMF.

Australia is showing signs of recovery too, with prices edging up 0.11 per cent after eight quarters in a row of falling values.

Dubai blossoms

Dubai, though, is the strongest market in the world, according to the survey, with the red-hot UAE market seeing prices soar by 28.02 per cent in the year to Q1 2013.

After house prices fell by 53% from Q3 2008 to Q3 2011 due to the global financial and economic meltdown, Dubai started to recover in Q2 2012, supported by the emirate’s robust economic growth. The strength of Dubai’s housing market has been bolstered by several other factors, including the availability of finance, the city’s status as a safe haven, an exchange rate pegged to the U.S. dollar, and improved consumer and investor confidence.

The UAE’s economy is expected to expand by 3.6% in 2013, from a real GDP growth rate of 4.8% in 2012, according to the Institute of International Finance (IIF). UAE was recently awarded the coveted emerging market status and was already included in the MSCI Emerging Market Index.

Israel has also performed surprisingly well, recording the 9th highest price rises in the survey, ahead of China. In Israel, the average price of owner-occupied dwellings rose by 6.34% during the year to Q1 2013, after year-on-year increases of 4.12% in Q4 2012 and 3.14% in Q3 in 2012 and declines of 0.46% in Q2 and 3.33% in Q1 2012. House prices rose by 3.12% during the latest quarter, the highest growth since Q4 2010.

Demand is rising too. In Q1 2013, the total number of dwellings sold climbed by 34.3% year-on-year to 4,817 units, according to the Central Bureau of Statistics (CBS). The number of dwellings for sale in the country dropped slightly by 1% in Q1 2013 from a year earlier.

In Q1 2013, the total number of dwellings begun fell by 3.4% year-on-year to 10,304 units while the number of dwellings completed rose by 5% year-on-year to 9,477 units, according to the CBS.

Israel’s economy grew by 3.3% in 2012, after expanding by 4.6% in 2011, 5% in 2010 and 1.1% in 2009. In 2013, economic growth is expected at 3.6%, according to the IMF.