Global housing markets stronger in 2012

The world's housing markets strengthened during 2012, according to the latest survey of global house price trends by the Global Property Guide. House prices rose in 24 of the 41 housing markets in our survey. The good news comes mainly from the US, Middle East and the Pacific, while the bad news remains concentrated in Europe.

Good news:

  • The U.S. housing market recovery continues. House prices continue to rise strongly. Construction activity is up. Delinquencies and foreclosures are down.

The FHFA's seasonally-adjusted purchase-only house price index rose by 3.51% during 2012, the highest growth seen since Q1 2006. The nationwide seasonally-adjusted S&P/Case-Shiller home price index rose by 5.36% during 2012, its second quarter of year-on-year gains.

Pacific housing markets have been improving. New Zealand's median house prices rose by 8.55% during 2012, the highest year-on-year rise since Q3 2007. Likewise, Australia's housing market is also showing signs of recovery, with house prices in the country's eight major cities falling by just 0.04% in 2012, the lowest annual decline since Q4 2010.

  • The Middle East's housing markets have been recovering strongly. In Dubai, house prices skyrocketed by 19.91% during 2012, the highest year-on-year increase since Q4 2008. In Israel, house prices rose by 2.79% during 2012, in contrast with a 2.39% year-on-year decline in the previous year.
  • Some previously depressed European housing markets have been recovering. In Turkey, house prices soared by 10.55% during 2012, in sharp contrast with the 2.39% decline in 2011. After falling the previous year, house prices have also risen in Denmark, Romania, Finland and Sweden in 2012. Finally, Ireland's downward momentum has significantly slowed, and Poland's house price decline seems to be easing.

Bad news:

  • Many European housing markets remain very depressed. House price falls have been accelerating in Greece, Spain, Netherlands, Portugal, Slovenia and Croatia. Indeed, the thirteen weakest markets in our survey were all in Europe.

Momentum: 21 housing markets showed better performance in 2012, in momentum terms, than last year, while 20 housing markets showed weaker momentum. This small difference becomes larger if, instead of comparing the number of countries for which momentum uptrended versus those that downtrended, we instead roughly quantify the actual amount by which momentum rose or fell. The exercise yields 166 percentage points of improvement, versus 82 points of momentum decline, for the countries in our sample during the year 2012, which confirms the impression that there really has been some upward momentum.

Inflation-adjustment: The Global Property Guide's statistical presentation uses price changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents. Nominal figures can be misleading, as suggested by the fact that in 2012, nominal house prices rose in 27 countries and fell in only 14 countries.

Conclusion: House prices are rising in more countries than not, and the momentum trend is clearly upwards. Much of Europe is not sharing the joy, though the situation in Ireland and some of core Eastern Europe is improving.

Source: Various series, data descriptions and sources here

U.S. house price rises accelerating. Strong activity evident in all housing indicators.

House price increases accelerated in 2012 in the United States, despite a weakening economy. The FHFA's seasonally-adjusted purchase-only house price index rose by 3.51% during 2012, the highest growth seen since Q1 2006. This sharply contrasts with the 5.5% year-on-year decline in 2011. However during the latest quarter, house prices increased by just 0.14%. As a reminder, these figures are adjusted for inflation, as are all subsequent figures, except those for the Ukraine.

This positive picture is supported by the S&P/Case-Shiller home price index, which rose by 5.36% during 2012, its second quarter of year-on-year gains. During the latest quarter the Case-Shiller index rose by 1.99%, the highest gain since Q4 2005.

Demand is rising sharply. The total number of new houses sold rose by 20% in 2012 from a year earlier to 367,000 units, according to the US Census Bureau.

Residential construction activity is also increasing. In 2012, dwelling permits rose by 29% units from a year ago to 769,700. Likewise, dwellings completed also increased by 11.1% to 650,000 units.

In January 2013, the number of delinquent properties dropped by 11% from a year earlier, according to the Lender Processing Services (LPS). Likewise, the total number of properties in foreclosure fell by 21% over the same period.

The US economy barely grew by 0.1% in Q4 2012, well below the 3.1% pace of expansion seen in the previous period. Economic growth is expected to be about 2% in 2013, according to the IMF. The Fed has kept the fed funds rate near zero since 2008 to buoy the economy.

Canada softens

Canada's housing boom, which started in 2000, now seems to be over, in the wake of tighter mortgage rules. House prices in Canada's eleven major cities rose by just 2.22% during 2012, down from a 4.4% increase the previous year. House prices actually dropped by 0.33% during the latest quarter.

In December 2012, home sales activity in Canada was down by 17.4% from a year ago, according to the Canadian Real Estate Association (CREA).

House prices in Canada surged by 62% from Q1 2000 to Q1 2008, and rose by another 18% from Q2 2009 to Q2 2012, despite several housing market cooling measures imposed by the government.

The economy expanded by a modest 1.8% in 2012, down from 2.4% in 2011 and 3.2% in 2010. The IMF predicts the Canadian economy is likely to grow by 1.8% in 2013.

The Bank of Canada has kept its overnight interest rate at 1% since September 2010.

Half of Europe up, the other half down

Despite some improvement in some countries, the thirteen weakest housing markets in our global survey were all in Europe.

Greece was the world's weakest housing market in 2012. House prices dropped 14.22%, worse than the 9.2% decline in 2011. Greece had a particularly dramatic 5.82% quarter-on-quarter decline in Q4 2012.

The Greek economy is estimated to have contracted by around 6% in 2012, after shrinking 6.9% in 2011, 3.5% in 2010, 3.3% in 2009 and 0.16% in 2008. The economy is expected to remain depressed in 2013.

Spanish house prices plunged 12.73% in 2012, the steepest decline in more than two decades. During the latest quarter, house prices dropped by 3.81%. Spain's real GDP shrank 1.4% in 2012 compared with 0.4% growth in 2011, according to the National Statistics Institute (INE).

The Netherlands comes third on the list of the world's worst performers. House prices fell by 9.52% during 2012, the eighteenth consecutive quarter of year-on-year house price falls. On a quarterly basis, house prices dropped by 1.27% in Q4.

The housing market in Croatia remains depressed. The average price of flats in Zagreb fell by 8.8% during 2012, the steepest decline since Q4 2009. During the latest quarter, house prices dropped 1.32%. Croatia's economy is estimated to have contracted by around 1.5% in 2012, after annual declines of 0.01% in 2011, 1.4% in 2010, and 6.9% in 2009.

Slovenia's housing market downturn continues. House prices in Ljubljana fell by 8.7% year-on-year in Q4 2012, its fifth consecutive quarter of house price falls. The economy contracted by 2.3% in 2012, after meagre growth of 0.6% in 2011.

These five countries all saw bigger house price falls this year than in the previous year.

European countries and capital cities with moderate house price falls in 2012 included Vilnius, Lithuania (-4.13%), UK (-3.67%), France (-3.12%), and Slovak Republic (-2.49%). All saw house prices drop during the latest quarter (-0.03% in Vilnius, Lithuania, -1.76% in the UK and -0.01% in the Slovak Republic).

Some other European countries saw their house price rises decelerate sharply. This category includes Riga, Latvia, which had house price increases of just 0.48% during 2012, Iceland (0.37%) and Germany (0.13%).

There is some genuinely good news in Europe. Turkey is the second best performer in our survey, with house prices soaring 10.55% during 2012, in contrast with the 2.39% decline in 2011. However, house prices in Turkey rose by just 0.57% during the latest quarter.

Other strong European housing markets include Denmark, with house prices rising by 5.8% in 2012, Norway (5.33%), Kiev, Ukraine (4.01%), Romania (3.58%), Switzerland (2.41%), Tallinn, Estonia (2.4%), Finland (2.12%), and Sweden (2.02%).

Some European countries continued to suffer, but saw their house price falls decelerate. Particularly remarkable were the lower price-declines in Ireland, with Irish house prices falling 5.65%, compared to 18.68% house price declines in 2011. Irish house prices actually rose q-o-q during the latest quarter (0.40%). In our view Ireland's house-price collapse may be over.

Other countries in the ‘less awful than before' category include Portugal (-6.85% house price falls during 2012, compared to -8.45% in 2011), Bulgaria (-5.42%, compared to -8.67 in 2011), and Warsaw, Poland (-5.2%, compared to -10.55 in 2011).

All these countries saw smaller declines in 2012, than the previous year.

Asian housing markets mixed

Of the eight Asian housing markets included in our survey, four performed more poorly this year than the previous year, while the other four countries showed improved performance.

Hong Kong is the world's best performer in our survey, with house prices surging 20.37% in 2012. There were annual rises of 13.03% in Q3, 5.19% in Q2, and 2.11% in Q1 2012.

House prices in Hong Kong are expected to continue rising in 2013, albeit at a slower pace. Hong Kong's economic growth slowed to 1.25% in 2012, down from 5% in 2011 and 7.1% in 2010. The economy is expected to grow by 3% in 2013, supported by a recovery in exports and stable domestic consumption.

House prices in Delhi, India, rose by 6.05% during 2012, a slowdown compared to the 25.26% price rises in 2011. All the same, Delhi house prices rose by 7.37% during the latest quarter.

In Makati CBD, Philippines, the average price of prime 3-bedroom condominium units rose by 4.9% year-on-year and 1.53% quarter-on-quarter in Q4 2012.

In Greater Taipei, Taiwan, house prices rose by 0.88% during 2012, after a year-on-year increase of 3.63% in Q3, and declines of 0.83% in Q2 and 0.38% in Q1 2012.

The other four Asian countries and capital cities included in our survey saw modest year-on-year house price falls in 2012. These included Shanghai, China (-1.83%), Thailand (-1.48%), Singapore (-1.11%) and Tokyo, Japan (-1.09%).

NZ bounced back strongly, Australia is recovering

New Zealand's median house prices rose by 8.55% during 2012, the highest year-on-year rise since Q3 2007.

The Reserve Bank of New Zealand has kept its official cash rate (OCR) at a record low of 2.5% since March 2011, to help revive growth after earthquakes devastated Christchurch and the surrounding Canterbury region.

Australia's housing market is now showing signs of recovery, after eight consecutive quarters of house price falls. House prices in the country's eight major cities fell by just 0.04% in 2012, the lowest annual decline since Q4 2010. House prices actually increased by 1.41% during the latest quarter. The Reserve Bank of Australia has kept the benchmark rate at a record-low of 3%.

South Africa's housing market is gaining momentum

After a sluggish performance over the past four years, the South African housing market is now gaining momentum. The price index for medium-sized houses rose by 3.57% during 2012, after eight consecutive quarters of annual house price falls. House prices increased by 1.63% during the latest quarter.

During the housing boom (2000-2006), house prices rose by an average of 20% annually. However in Q1 2008 the boom ground to a halt, following the global financial crisis.

Brazil's housing market remains surprisingly healthy

Brazil remains the third best performer in our survey, though momentum is now slowing sharply. In Sao Paulo, Brazil, house prices rose by 9.4% during 2012, far lower than the 19.21% and 17.08% year-on-year increases seen in 2011 and 2010, respectively, according to the FIPE-Zap price index. House prices in Sao Paulo were up 1.09% during the latest quarter.

Brazil's economy grew by just 0.9% in 2012, after real GDP growth rates of 2.7% in 2011 and 7.5% in 2010. Economic growth is expected to be about 3.3% in 2013. To boost the economy, President Dilma Rousseff has recently introduced a series of stimulus measures. In addition, the central bank cut the Selic rate for the tenth straight time in October 2012 to a record 7.25%.

Middle East's housing markets recovering strongly

In Dubai, UAE, house prices soared by 19.91% during 2012, in sharp contrast with the 0.93% year-on-year decline seen in 2011.

Dubai's housing market had been adversely affected by the global financial and economic meltdown with house prices falling by 53% from Q3 2008 to Q3 2011. It finally bounced back in 2012, supported by the emirate's robust economic growth. UAE's economy was estimated to have expanded by 4.5% in 2012.

In Israel, the average price of owner-occupied dwellings rose by 2.79% during 2012, after a year-on-year increase of 3.14% in Q3 and declines of 0.46% in Q2 and 3.33% in Q1 2012. However, house prices actually fell by 0.93% during the latest quarter.

In 2012, the total number of new dwellings sold in Israel rose by 14% to 22,074 units, according to the CBS. Israel's economy grew by 3.3% in 2012, after expanding by 4.6% in 2011, 5% in 2010 and 1.1% in 2009.

Source: Various series, data descriptions and sources here

Article by: Lalaine Delmendo -

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