Global property growth slows further

24 November 2008

Global residential property prices have unsurprisingly fallen over the past quarter, as a result of the global financial crisis, according to Knight Frank’s latest Global House Price Index.

The UK, which recorded falls of 4.6% during the quarter, was among the worst performers along with Latvia (6.2% down), Lithuania (5.7%), Canada (4.9%), and Norway (4.5%), according to the report. The firm's global house price index said average prices across the world fell by 0.3% compared with Q2.

"It is now clear that no part of the world is likely to escape the credit crunch as property prices start to fall in more and more parts of the globe," said Nicholas Barnes, head of international research at Knight Frank.

"We expect that trend to continue with the majority of locations showing zero or negative growth by the end of the year."

On an annualised basis, global house prices continued to grow, though the rate of 3.8% compared with the Q3 2007, has slowed. Over the past year, prices in Britain have suffered the fourth largest percentage decline in the table of 44 nations compiled from official national statistics. Compared with Q3 2007, residential prices in Britain have fallen by 10.6%. In Estonia prices have dropped by 16%, in the US prices are down 16.3% and Latvia declined by 24.1%.

Several countries, chiefly in eastern Europe, have seen strong growth over the past year, led by Slovakia, where prices have risen by 31.2%, Russia is 26.9% ahead and Bulgaria is up 26.8%.

But in each case, growth has slowed sharply, suggesting they are reaching a turning point. In Slovakia, growth compared with Q2 had slowed to 4.9%, in Russia the figure was 4.2% and in Bulgaria 3%.

"There are signs that some of the strongest performers of previous quarters are starting to weaken," Barnes said.

Dubai, included in the survey for the first time, is showing a 76.1% growth in house prices compared to the third quarter of 2007. Even in the oil-rich state demand is dropping, with prices easing at 15.7% against 42.4% in the second quarter.