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Global house prices up 2.0% in Q1 2013

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21 Jun 2013

The Knight Frank Global House Price Index rose by 2.0 percent in Q1 2013 and by 6.6 percent over a 12 month period, reveals a recent survey.

Hong Kong recorded the largest rise on an annual basis (up by 28 percent) while prices in China rose the most on a quarterly basis (up by 10.7 percent)

Writing in the report, Kate Everett-Allen for international residential research at Knight Frank points out that Hong Kong recorded the largest rise on an annual basis (up by 28 percent) while prices in China rose the most on a quarterly basis (up by 10.7 percent)

Greece recorded the largest annual fall in mainstream prices for the third consecutive quarter, declining by 11.8 percent and the US saw prices rise by 10.2 percent, its highest rate of annual growth since 2006

Europe is the weakest-performing region, mainstream prices fell by 0.3 percent on average during the last 12 months and South Africa ranked at No 8 recorded an 11.3 percent rise.

South Africa’s momentum is linked to an increasingly wealthy middle class who are tapping into the rising confidence of the wider African continent, keen to get on the property ladder, according to Knight Frank.

In the US, prices have now risen for 12 consecutive months boosting consumer confidence, which hit a five year high in May.

According to Everitt-Allen, 35 of the 55 housing markets (63 percent) tracked by Knight Frank’s Global House Price Index recorded an increase in mainstream property prices in the year to March.

The index now stands 14.7 percent above its recessional low in Q1 2009 and property prices in all world regions, except Europe, increased in the year to March with the Middle East performing best, rising by 10.6 percent on average.

“Mainstream property prices in Hong Kong and China look to be flouting the efforts of policymakers to cool their property markets; both recorded price rises in the first quarter despite a raft of measures to kerb escalating prices.”

Greece, Hungary and the Netherlands occupy the bottom three rankings this quarter having seen prices fall by 11.8 percent, 9 percent and 8.3 percent respectively.

The Dutch market saw prices fall by 8.3 percent in the year to March driven by rising household debt and growing unemployment.

Located in the sought-after district of Dahlem in the southwest of Berlin, this six bedroom property with a swimming pool and a private cinema is currently on the market through Engel & Völkers Berlin.

Meanwhile, she notes that Ireland has rid itself of double-digit price falls with a price fall of 3 percent in the year to March compared to a 16 percent decline a year earlier.

In the UK, prices rose by 0.2 percent in the year to March and stand 8.9 percent above their low in Q1 2009.

South African buyers are reportedly actively buying homes in the wealthy district of London in the UK, click here to read the article.

SA house prices

According to the Standard Bank and FNB House Price Indexes for May, there was an improvement in house price growth although banks are wary of assigning double digit growth in 2013.

The Standard Bank House Price Index improved by 10.3 percent year-on-year (y/y) from 9.8 percent y/y in April while FNB recorded 5.8 percent y/y from 5.4 percent in April.

Read the article here.

Jan le Roux, chief executive officer of Leapfrog Property Group, says house price growth is not at spectacular levels currently and believes property prices will increase over time especially in high density areas where the demand for housing is always high.

“Building homes and apartments is becoming increasingly expensive, and it becomes clear that current properties are by no means overvalued,” says Le Roux. 

In 2012, property economist Erwin Rode made a few waves with his statement that property prices were overvalued by at least 25 percent.

At the time, Rode said SA house prices are 25 percent overvalued with no vigorous growth expected.

Furthermore, Rode said real house prices are still 25 percent more expensive than is suggested by their trend line of the past 44 years and this statement caused estate agents to hit back at Rode for his comments.

Read the article here.

Le Roux points out that at the time, a number of those associated with the industry objected to his appraisal with John Loos, FNB home loans strategist, believing that Rode was not using the most accurate period from which to make his deductions.

South Africa ranked at No 8 recorded 11.3 percent rise and its momentum is linked to an increasingly wealthy middle class who are tapping into the rising confidence of the wider African continent, keen to get on the property ladder, according to Knight Frank.

Loos reasoned that Rode based his assessment over a 44 year period from 1967 to 2011 but that it would be more accurate to valuate properties from 1995 onwards due to the political shifts that preceded it.  

“The issue I had, and still have, with Rode’s statement then is that property values will always increase over time – there is a scarcity of land and if one takes a long-term perspective, property is an appreciating asset.”

He notes that Rode’s statement has proven to be incorrect for the moment and believes caused a number of homeowners to panic unnecessarily.

“It is no secret that the residential property market is not soaring like it did during the 2006 and 2007 heydays when, according to Lightstone, the nationwide average for a sectional title property increased from R546 960 to R642 764.

It is also not news that new homeowners have been struggling to obtain finance due to banks' strict lending criteria.

Increased petrol and electricity prices as well as mounting inflation have also put pressure on people’s incomes, he explains.

According to Lightstone, property prices have increased steadily with each consecutive year since 2009 - the nationwide average for a sectional title property now at R782 547.

The trajectory for freehold properties was slightly more up and down with two drops between 2007 to 2009 (decreasing to R563 488), but has not risen to R763 005 in 2013, he says.  

This penthouse spans some 154 square metres and is located in the district of Kreuzberg directly along the river on the Paul-Lincke-Ufer, and is selling for €650 000 through Engel & Völkers Berlin-Mitte.

“Property prices might still take a knock this year due to the current financial climate but the situation will correct itself once the economy improves.”

Buying a home in Germany

According to the Knight Frank report, Germany is ranked No 40 recording -1.9 percent but estate agents report a consistent rise in property prices in central, sought-after locations with a huge demand for luxury homes in Berlin.

Anne Riney, sales director at Engel & Völkers in Berlin-Mitte, explains that the German economy is still regarded as very stable and attracts many private buyers and investors from around the world to Berlin.

“The city has a cosmopolitan flair and has established itself firmly on the map as a cultural, financial and political centre.”

Riney notes that demand for properties for sale and rent exceeds supply, and in Berlin-Mitte, prices are pegged at €15 000 per square metre for penthouse apartments and exclusive new developments at historic addresses in the Mitte district – around Gendarmenmarkt, as well as Hackescher Markt and the magnificent boulevard Unter den Linden.

Compared to London, Hong Kong, Moscow or Miami, rental and purchase prices in Berlin still remain low.

Locations on the city outskirts, such as Zehlendorf, Dahlem and Grunewald in the southwest of Berlin, have traditionally been desirable neighbourhoods and continue to enjoy a high level of popularity.

Most sought after are the grand mansions set in expansive grounds overlooking lakes including the Halensee, Schlachtensee, Grunewaldsee, Nikolassee, Wannsee and as far as HeiligenSee in Potsdam.

In the US, prices have now risen for 12 consecutive months boosting consumer confidence which hit a five year high in May.

On the Kleiner Wannsee lake, upmarket properties are changing hands for up to €8 000 per square metre, and for up to €7 000 per square metre on Griegstraße in Grunewald, she explains.  

In Kreuzberg, property prices continue to rise as demand for rentals and sales of apartments soars.

For prime addresses in and around Gräfestraße, Bergmannstraße, Marheinekeplatz and Chamissoplatz, prices per square metre for freehold properties are between €3 500 and €5 000 while rental prices for apartments and houses range from €10 to €15 per square metre.

Riney notes that there is a strong move from renting to owning property in Berlin and in Berlin central, the average time it takes for properties to sell has dropped over the past year from six to three months.

“Premium properties are sold straight after the very first viewing appointment in particularly sought-after locations as both private buyers and institutional investors are not hesitating when it comes to placing their wealth in tangible assets like real estate, either for private use or investment purposes.”

Riney says more Berlin citizens are thinking about buying property in the capital, in light of the rising rent prices and low interest rates.

Apart from German buyers, the Berlin market is dominated by investors from Belgium, Russia, Switzerland and Luxembourg, with an increasing number of Italian buyers investing in freehold apartments in the district of Neukölln and the surrounding area. 

Small-scale buy-to-let investors achieve returns of between four and five percent for apartments with many looking beyond top central locations to more peripheral districts.

“We anticipate a sustained rise in property prices in the long term for the entire residential property market in Berlin,” she adds. – Denise Mhlanga

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