Speedy recovery in global housing markets unlikely
The collapse of the world’s housing markets is still accelerating according to the Global Property Guide’s latest survey with only Germany and Switzerland achieving a positive momentum in 2008.
Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10 percent were Latvia (Riga), 37 percent), Lithuania (Vilnius), 27 percent, the US, 20 percent, the UK, 18 percent, Iceland,16 percent, Ireland, 12 percent, and the Ukraine (Kiev),12 percent. (All figures inflation-adjusted).
During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.
The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37 percent during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70 percent in 2006.
The most alarming decline took place in the 4th quarter, when prices declined by 15 percent, the steepest quarterly drop in real terms in any country.
These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.
In the US, the centre of the global financial crisis, 2008 house prices fell 20 percent according to the Case-Shiller house price index, which emphasises urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6 percent and 3 percent respectively, during 2008.
The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.
Canada has been much less affected than the US.
Both Australia and New Zealand saw house price declines during 2008, of 7 percent and 8 percent respectively.
Housing markets in Asia have not been insulated. Singapore’s private residential prices dropped 9 percent during 2008, in sharp contrast to the 26 percent price increase of experienced during 2007.
Hong Kong has been badly hit by the crisis. During the last quarter, Hong Kong experienced a severe decline in prices of 14 percent.
In Makati, Philippines, prime 3-bedroom condominium prices fell by 2 percent during 2008, after an 11 percent price rise during 2007.
Japan recorded modest Tokyo condominium price rises of 1.2 percent during 2008.
In Shanghai, China, house price rises slowed to 5 percent y-o-y by the end of 2008, after peaking at 30 percent y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional and Xinhua News Agency reported house prices declines in 70 major cities during 2008.
In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41 percent during 2008. However during the year’s final quarter, prices fell by 8 percent in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.
History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.
The Global Property Guide – www.globalpropertyguide.com -is an on-line property research house, specialising in analyzing residential property valuations around the world.