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Global warning - residential property growth slows

Jude Buttle

The house price slump that began in the US is spreading worldwide, according to the latest figures from international property professionals Knight Frank.

The estate agent's statistics show that steep declines are now taking place across Europe and into Asia, with the global growth falling to 4.8% during the second quarter of 2008, down from 6.1% in the first quarter of the year.

Prices are now falling in almost half the markets listed in the index, with northern Europe (including the Baltic States), together with US property, seeming to suffer the most.

The country recording the steepest drop is Latvia, with house prices plummeting by 24.1% over the past year, demonstrating that rising inflation and mortgage costs are real risks for the emerging economies of Europe.

Several countries are entering their second year of house price declines. Germany was amongst the worst hit with prices falling at a rate of 4.4% last year and 2.5% this year.

Even countries where prices have not fallen are witnessing a rapid deceleration in price increases. In South African property, the rate of house price inflation has dropped severely from 15.5% this time last year to 3.8%. Spain, France and Greek property, price growth has halved and is running below 3.2%.

However, showing a clear disparity in global property trends, Bulgaria, Slovakia, Russia, the Czech Republic, Hong Kong, Singapore, Cyprus and Colombia are all still recording growth in double figures.

Bulgaria has once again been consistently impressive, replacing Russia as number one and recording a growth of 68% over the past two years, as well as 32.2% for the second quarter of 2008.

In the past year, foreign-direct investment has poured into Bulgaria, driven by its economic growth as a manufacturing base, whilst Bulgarian property prices have also benefited from the country's increasing popularity as a holiday-home destination.

Similarly, prices in Slovakia were driven upwards by a booming economy, as gross domestic product there rose by 10.4%, last year.

Nick Barnes, head of international research at Knight Frank, said: "The index shows that global house price inflation is continuing to fall back, with much of continental Europe now seeing low or negative growth. Housing markets in countries such as Spain, Denmark, the UK and Ireland are all being severely challenged by the global credit squeeze."

Barnes added: "The rapidly depreciating housing markets of the Baltic states demonstrate that rising inflation and mortgage costs are real risks for the emerging economies of Europe, particularly those that have seen high levels of investment activity over recent years."

 

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