The winners and the losers in Global House Prices are revealed in a
report by the Global Property Guide. The worlds house price boom
continues in 2007, albeit at a much slower pace and with different set
A dramatic slowdown has taken place in several countries in Europe.
House prices in Estonia, 2005 and 2006s star performer, rose only
5.68% y-o-y to Q1 2007, dramatically lower than the 77.52% y-o-y increase
to Q1 2006.
Higher interest rates and an overheating market were the main causes
of the slowdown. The key interest rate of the European Central Bank
(ECB) has been raised nine times to 4% in June 2007, from its historic
low of 2% in Nov 2006.
Other European countries that experienced lower house price changes
y-o-y to Q1 2007 than in 2006 included France, Sweden, Ireland, Spain,
Greece, the Netherlands, Switzerland and Portugal.
Irelands annual house price growth slowed to 7.44% y-o-y to Q1
2007, a deceleration from 12.07% y-o-y to Q1 2006. Apart from the higher
interest rate, the heating issue on Stamp Duty also contributed to the
The US house price rise also slowed to 4.07% y-o-y to Q1 2007, down
from 12.78% y-o-y to Q1 2006. The US Federal Funds rate has risen sharply
from its low of 1% in May 2004 to its current level of 5.25%. The Fed
has kept the rate unchanged since June 2006. This rate increase has
meant trouble for sub-prime borrowers, leading to delayed payments and
Strong rises in non-Eurozone Europe
Interestingly, European countries which have not adopted the Euro have
experienced stronger house price rises y-o-y to Q1 2007, than countries
within the zone. Such is the case of Latvia which plans to adopt the
Euro in 2010. Latvia took the lead in house price increases y-o-y to
Latvia's capital, Riga, experienced a remarkable appreciation of 61.91%
y-o-y to Q1 2007, higher than the 35.64% y-o-y increase to Q1 2006.
However, recent data from Latio, Latvia's leading research-oriented
real estate agency, show that prices have started to fall in Q2 2007.
Lithuanias house prices rose by 26.32% y-o-y to Q1 2007, up from
25% y-o-y to Q1 2006. Lithuania has recently increased its long-term
interest rate to 4.6% in June 2007, from 4.2% in March 2007. The European
Commission rejected Lithuanias bid to adopt the euro in 2007 because
its inflation breached the required limit.
House prices in Norway were up by 16.69% y-o-y to Q1 2007. Norway rejected
EU membership in a referendum in 1972, and again in 1994. Positive factors
such as continued economic expansion and the strength of the labour
market overpowered the pull exerted by higher interest rates.
After taking a breather in 2005 and early 2006, house price growth in
the UK accelerated to 9.25% y-o-y to Q1 2007, up from 5.3% y-o-y to
Q1 2006. Particularly, Northern Ireland and London saw double-digit
y-o-y house price increases in Q1 2007, at 57.6% and 14.3%, respectively.
Cyprus, which is set to adopt the Euro starting January 2008, is in
a middle of a housing boom with house prices rising by almost 10% y-o-y
to Q1 2007. Liberalization of the financial sector, a decrease in interest
rates, and increased demand for higher quality housing and second homes
were the main drivers for the price boom.
Now its AsiaPacifics turn
The house price boom is now moving towards the Asia-Pacific region.
Property prices in countries affected by the Asian Crisis are showing
strong signs of recovery, prompting fears that a property bubble is
developing anew in the region (see related story).
Property prices in the Philippines, Singapore and South Korea rose by
more than 10% y-o-y to Q1 2007, higher than in 2006. Although Japan
registered a nationwide land price drop of 1.48%, land prices in its
six major cities increased by a remarkable 7.75% y-o-y to Q1 2007, suggesting
a real recovery from the 15-year house price downturn. There are no
official house price statistics in Japan, so land prices are used as
Australia has recovered from its 2004-2006 slowdown. Despite higher
interest rates, house prices rose by almost 8% y-o-y to Q1 2007, from
4% y-o-y to Q1 2006.
New Zealands house prices rose by 11.36% y-o-y to Q1 2007, significantly
up from 9.55% y-o-y to Q4 2006. This is despite the fact that the Reserve
Bank of New Zealand (RBNZ) has increased interest rates since early
2004 to cool down the housing market.
Elsewhere, South Africa saw 16.74% house price increases y-o-y to Q1
2007. South Africas house prices have been escalating for seven
continuous years, with price increases peaking at 30% in 2004.
Canadas house prices moved forward in Q1 2007, thanks to strong
economic growth, low mortgage rates and large net immigration. House
prices rose 9.30% y-o-y to Q1 2007, up from 7.55% y-o-y to Q1 2006.
Thailand and Israel, after suffering from political crises, have not
yet recouped the confidence of investors. This resulted in a drop of
5.09% y-o-y to Q1 2007 in Thailands house prices, down from an
8.03% y-o-y increase to Q1 2006. Israels house prices fell by
10.52% y-o-y to Q1 2007, due to increased political and security concerns
in the Middle East.
Portugals sluggish economic expansion exacerbated the effect of
higher Euro interest rates. House prices have risen by a meager 1.14%
y-o-y to Q1 2007, after an already low growth rate of 2.17% y-o-y to
Prince Christian Cruz, Senior Economist