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Global Insight: Economic uncertainty filters into global house prices

(by Kate Everett-Allen)
 
Globally, house prices increased by 3.4% on average in the year to March 2016, but top-performing countries such as Turkey and Australia are seeing their rate of annual price growth slow. 
 
Turkey, which leads the annual rankings for the fourth consecutive quarter, has seen its rate of annual growth decline from 18% last quarter to 15%. Security concerns, Russian sanctions and mounting pressures on the lira are curtailing investment despite high demand and low supply characterising the wider property market.
 
Other strong performers such as Australia and New Zealand have also seen price growth moderate. Despite Australia’s recent rate cut to 1.75% prices are unlikely to keep growing at the same rate given mortgage debt is at a record high relative to income and December 2015 saw the introduction of new fees for foreign buyers.
 
House prices in New Zealand increased 11% year-on-year but have slipped from their peak in Q3 2015. Weaker economic growth and regulatory changes in the form of higher deposits for investors have dampened demand.
 
The US and the UK are largely treading water, price growth in the first three months of 2016 equated to 0.9% and 1.6% respectively, linked in part to political worries, notably a potential Brexit in the UK and the US presidential election.
 
Aside from Turkey, emerging markets have seen prices enter a period of flat or low growth since mid-2014. The BRIC nations recorded annual price growth of 3% on average in the 12 months to March 2016, four years ago this figure was closer to 11%. Capital flight, currency shifts (partly due to US rate rise), volatile equity markets and slowing wages are hampering demand.
 
Although Europe is no longer the weakest-performing world region – a title now held by Russia and the CIS – economic headwinds still persist in the Eurozone. Twelve of the bottom 20 rankings are occupied by European countries and of these, nine are members of the Eurozone.
 
For the full rankings read the Global House Price Index 





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