The latest Knight Frank global house price index shows that property prices at major locations across the globe increased by 6.5% between March 2016 and 2017. This is the highest rate of growth recorded in the last three years. Price movement in 55 countries was taken into consideration, out of which 11 countries recorded double digit price growth in the year compared to only four a year earlier.
The figures show Iceland leading the index, with an average price growth of 17.8% in the year to March 2017 while price growth in China fell marginally to 10.3% per annum with more than 45 cities having implemented home purchase restrictions.Ahead of their 2017 elections France and the Netherlands saw price growth increase while it slowed in South Korea, the UK and Germany.
The data also shows that it is not simply that more countries are recording positive growth although that has played a part. While 43 countries recorded price rises in the first quarter of 2016, this has now risen to 48.
Increase in property price is accompanied by a simultaneous increase in the number of countries witnessing double digit annual growth rates. Kate Everett-Allen, head of international residential research Knight Frank, explained that given the uncertain global political landscape, the ramping up of cooling measures in large parts of Asia and the unravelling of stimulus measures such as QE in some parts of the world, growth is helped by economic growth.
She pointed out that the International Monetary Fund (IMF) forecast global GDP to rise by 3.5% in 2017 up from 3.1% in 2016 and property’s reputation as a safe haven investment is also adding property price growth along with the greater availability of mortgage finance in developing markets.
Iceland, taking the lead for the second consecutive quarter, is heating up with average house prices rising by 17.8% year-on-year with a shortage of new supply behind the accelerating prices. Iceland’s Housing Financing Fund suggests 9,000 new apartments need to be delivered over the next three years in Reykjavik alone to keep pace with demand.
China’s ranking has slipped to tenth from seventh, but the actual fall in property prices is marginal at 10.3% in this quarter, down from 10.8% in the last quarter. Despite administration of various property market cooling measures, including home purchase restrictions (HPR) and increased down payment ratios, residential prices have continued to rise in China.
Amongst the European countries, prices are up 12.6% in Malta, up 11% in the Czech Republic, up 10.7% in Estonia and up by 10.5% in Hungary. The report says that economic expansion and the Individual Investor Programme (IIP) explain Malta’s rise, whilst historically low interest rates, wage increases and rising foreign interest are strengthening demand in the remaining three.
With political uncertainty looming large in UK, property prices there continue to ease with annual growth reaching 4.1% in the year to March, down from 5.3% a year earlier. A brief look at some of the key elections in 2017 shows France and the Netherlands stand out as two key countries where price growth strengthened ahead of their polls.