The Knight Frank Global House Price Index rose by 8.4 percent in 2013 and by 1.2 percent in the final quarter with Dubai recording the highest annual price of 34.8 percent, however, prices in that country remain 25 percent below their 2008 peak.
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Ranked number 29 out of 56 countries in the index, South Africa recorded growth of 2.8 percent with Greece (-9.3 percent), Croatia (-14.4 percent) and Ukraine (-25.9 percent) being the weakest performing markets in 2013.
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In South Africa, according to the FNB House Price Index, house prices grew by 8.6 percent year-on-year in March while real house price growth was 2.48 percent y/y in February.
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According to the report, house prices rose in 39 countries compared to 27 in 2012.
Writing in the report, Kate Everett-Allen, international residential researcher at Knight Frank, explains that 8.4 percent represents the highest annual rate of growth since the index started in 1995.
The headline global index is now weighted according to each country’s GDP, which means that the movement of house prices in the US and China will have a greater bearing on the index’s performance than that of locations such as Malta or Jersey, she explains.
Top 3 global performers
Dubai
According to the report, between Q2 and Q4 2013 on a six month percentage change, prices grew by 15.3 percent before reaching 34.8 percent by the end of the year.
Knight Frank residential research manager for the United Arab Emirates, Khawar Khan, says in Q4 2013 both prime apartment and villa prices in Dubai rose by 15 percent y/y – a slowdown compared to the preceding four quarters, when the growth rate averaged 21 percent.
He says this decline in price growth price was primarily reflective of slower demand as a flurry of “cooling” measures were introduced in the final few months of 2013.
This included, for example, the rise in the transfer fee from 2 to 4 percent and new mortgage caps for nationals and expats.
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“Given that prime residential prices are still almost a third below their previous peak, and the fact that there is little in the way of new apartments due to be delivered over the next 12-18 months, we think there is decent scope for prices to play 'catch-up'.
“We anticipate that prime residential prices in Dubai could rise by 10-15 percent this year,” says Khan.
He notes that the prime residential market should also benefit from Dubai’s growing population of high net worth individuals, attracted by the emirate’s favourable tax regime, strong lifestyle characteristics and a well performing economy.
“On balance, we think that residential prices could rise by another 10-15 percent over the next year, with the differential between prime apartment and villa prices closing as the former outperforms,” he says.
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China
Ranked number 2, China saw a huge growth jump from 10.8 percent between the second and fourth quarter of 2013 and reached 27.5 percent by the end of 2013.
Nicholas Holt, Asia Pacific head of research at Knight Frank, says in China, the implementation of the “Five New Measures”, which aimed to cool the residential market continues to vary significantly across the country.
Prices have continued to increase across most regions, although volumes came off in a number of cities. Knight Frank’s composite price index of Beijing and Shanghai remained stable over Q2 2013.
Holt says Singapore and Hong Kong are likely to see sales volumes further compromised as new purchasers see mortgage rates rise, and the attraction of property recedes slightly.
Pricing is more difficult to predict because house prices are not influenced by interest rates only, but more by fundamentals with factors such as economic performance have a bigger impact on house prices than changes in interest rates.
If the fragile global economic recovery continues, hard, income yielding assets such as property will continue to do well, on the other hand if the global recovery gains pace, property will again benefit from growth, he points out.
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Taiwan
Taiwan came in at number three with price growth of 15.1 percent by the end of 2013 from 2.9 percent between the second and fourth quarter of 2013.
Holt says five years on from the collapse of Lehman Brothers, the Asia-Pacific residential markets have been through quite a roller coaster ride and have undoubtedly been impacted by the various cooling measures implemented across Asia Pacific.
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Other locations
Portugal
Although ranked number 40 recording growth of -0.5 percent in 2013, buying property in Portugal is a viable option for savvy investors looking for the opportunity to benefit from all this developing nation has to offer.
Globally, house prices grew by 8.4 percent in 2013 and prices rose in 39 countries compared to 27 in 2012.
James Bowling, chief executive officer of Monarch & Co says the property buying and rental market in Portugal continues to show resilience despite the tough economic climate and is performing extremely well.
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He notes that many South African investors have found the property market in Portugal a rather attractive investment option.
“Unlike some of the colder countries, Portugal has a very similar lifestyle and climate offering to South Africa,” says Bowling.
Australia
In the rankings, Australia came in at number 13 with price growth of 9.3 percent from 5.9 percent between the second and fourth quarters of 2013.
Bill Rawson, chairman of the Rawson Property Group says the Australian property market’s ability to attract foreign property buyers, particularly those from China and Asia in general is very impressive.
This buying activity has seen prime property prices increase in all major centres such as Sydney, Perth, Adelaide and Brisbane.
In his recent visit to the country, he says he came across Chinese buyers who paid 20 percent above the market value for a AUS$40 million development in Sydney.
One of the main factors fuelling confidence in the Australian property market is the accuracy, detail and comprehensiveness of the statistics available to buyers and indeed to the public as a whole, he points out.
France
France ranked number 44 recorded growth of -1.4 percent in 2013 and Everett-Allen says the prime property market has faced considerable challenges in recent years.
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The French economy remains in the doldrums; GDP growth is forecast to reach only 1 percent in 2014, yet against this fragile economic backdrop Knight Frank’s applicant and viewing numbers increased by 28 and 52 percent respectively in the third quarter of 2013 compared to the same period in 2012.
Many buyers have simply been motivated by the fact that prime prices, in some French regions, are at a seven-year low, and many are starting to see buying opportunities.
She notes that British buyers have made a tentative return attracted by buying opportunities, most notably in South West France, the Côte d’Azur and Provence.
Compared to other capital cities, Paris boasts relative affordability with prime prices, at a similar level to where they were three years ago.
Meanwhile, prime property prices in South West France have declined by a further 10 percent in the last year taking the fall from the market’s peak in 2007 to approximately 40 percent.
On the Côte d’Azur the sub-€1.5 million as well as the €5million + price bracket have recorded the most prime market sales in 2013, according to the report.
“We are cautiously optimistic about the market in 2014 and although economically and politically fragile, France still offers solid fundamentals in terms of its lifestyle, security and investment opportunities.”
She adds that they expect the upturn in enquiries observed in the second half of 2013 to translate into sales in 2014, but buyers and their advisors will remain prudent and price sensitive. – Denise Mhlanga
