BY Chris Prasad
The overall climate of political and economic uncertainty has done little to slow down rising house prices globally, says international property firm Knight Frank.
In its latest Global House Price Index report, the firm’s global research shows that average house prices around the world rose at their fastest rate for almost three years.
By the end of last year, house prices around the world increased by 6% on average, which higher that the 4.1% registered in 2015. This is the highest annual rate recorded since the first quarter of 2014.
Surprisingly, Iceland lead the rankings for the first time since Knight Frank started tracking prices for the index, which began in 2006. Prices there rose by a startling 14.7% last year, but this is owed to an overall strengthening economy in the country – the International Monetary Fund (IMF) estimates that GDP rose by 4.9% in 2016.
Also, according to international residential research analyst at Knight Frank, Kate Everett-Allen, two base rate reductions last year and rising interest from foreign buyers explains the jump from 9% in 2015.
Overall, the top of the rankings table looks significantly different from a year ago. Long-term frontrunners such as Turkey and Sweden have actually slipped down the rankings from the first and third positions in 2015 to fifth and sixth in 2016.
Recent security concerns have dented household confidence in Turkey, said Everett-Allen, as well as a weakening lira and a rate rise of 8%.
Sweden, saw annual price growth halved from 12.3% in 2015 to 6.1% in 2016, while China jumped from 43rd position in the rankings in 2015 to 7th with average prices now increasing by 10.8% per annum according to the country’s National Bureau of Statistics.
Despite strong price inflation in 2016, Everett-Allen said the trend is far from uniform and many of the cities experiencing the strongest increases have now seen new lending restrictions introduced.
While the top 10 has shifted radically over the last year, the bottom end of the rankings table looks broadly familiar. Ukraine, Taiwan, Singapore and Cyprus continue to be characterised by weak growth either due to ongoing geopolitical crises, economic fragility or cooling measures which are artificially restraining growth.
The growth rate in the United States (5.8%) saw a marginal increase in the last quarter of 2016, whilst the United Kingdom (4.5%) drifted lower.
However, the Baltic states are quietly creeping up the rankings. Lithuania, Estonia and Latvia all sit within the top 20 and together averaged 9.9% growth in 2016, up from 5.2% a year earlier.
The overall picture is one of stable or rising prices, despite the prevailing global political and economic uncertainty. The number of housing markets recording price rises has increased from 43 in 2015 to 47 in 2016.
With higher inflation and diverging monetary policies expected in 2017, Knight Frank sees a widening gap between the strongest and weakest performing market.