Global House Price Downturn Accelerated At End Of 2008 According To The Global Property Guide
It has been a dismal year for house prices, according to the Global Property Guide’s latest survey of publicly-available house-price time-series for the year 2008. And seen from a global perspective, the downturn is still accelerating.
The collapse of the world’s housing markets can be seen from three points of view, and unfortunately, all of them reinforce the bad news.
During 2008, the downward price momentum accelerated, as compared to 2007.
Only 2 countries saw positive momentum in 2008 (a slower downward house price movement than last year, or faster upward movement), while 28 countries saw their housing market momentum deteriorating, compared to the previous year. The two countries with a positive momentum were Germany and Switzerland.
During 2008, house prices fell in most countries.
During 2008 only 8 out of 32 countries saw house prices rise, after adjustment for inflation, while 20 countries experienced house price falls.
In contrast, during the year 2007, the downturn was just beginning, and only 6 countries saw house prices fall, while 24 countries saw house prices rise (all figures inflation-adjusted).
Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10% during 2008 were Latvia (Riga) (37%), Lithuania (Vilnius) (27%), the US (20%), the UK (18%), Iceland (16%), Ireland (12%), and the Ukraine (Kiev) (12%) (all figures inflation-adjusted).
During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.
During 2008’s final quarter, 9 countries saw house price falls of 5% or more during just that quarter. Price drops of more than 10% during this single quarter occurred in three countries – in Latvia (Riga), which saw price falls of 15%, in Ukraine (Kiev) (13%), and in Hong Kong (15%). Other countries with Q4 house-price falls of 5% and over, included the UAE (8%), Lithuania (7%), Iceland (7%), Singapore (6%), Bulgaria (5%), and the UK (5%) (all figures inflation-adjusted, except UAE).
These price falls were much greater than during the previous quarter, Q3. During that previous quarter, only two countries experienced house-price falls (inflation-adjusted) of 5% or more, and no countries experienced house-price falls of more than 10%.
REGIONAL SURVEY BY GLOBAL PROPERTY GUIDE
Europe has major problems
The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37% during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70% in 2006. The most alarming decline took place in the 4th quarter, when prices declined by 15%, the steepest quarterly drop in real terms in any country. These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.
Average prices of apartments in Vilnius, Lithuania, fell by 27% during 2008. House prices started slowing in mid-2007, and crashed in early 2008.
House prices in the UK plummeted by 18% in 2008. Although mortgage interest rates dropped slightly, to 4.48% in December 2008, the number of loan approvals for house purchases fell 58% in 2008.
There is serious trouble in Iceland (house price fall of 16% during 2008), Ireland (12%), Ukraine (12%), Malta (9%), Portugal (8%), France (8%) Finland (7%), Norway (6%) and in Spain (6%).
North America’s woes
In the US, the centre of the global financial crisis, in 2008 house prices fell 20% according to the Case-Shiller house price index, which emphasizes urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6% and 3% respectively, during 2008. The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.
Canada has been much less affected than the US.
Pacific heads down
Both Australia and New Zealand saw house price declines during 2008, of 7% and 8% respectively.
Asia no longer insulated
Housing markets in Asia have not been insulated. Singapore, Hong Kong and Philippines recorded house price falls during 2008.
Singapore’s private residential prices dropped 9% during 2008, in sharp contrast to the 26% price increase of experienced during 2007. The developed countries’ economic troubles adversely affected Singapore’s exports, and during 2008, output in the manufacturing sector, particularly of electronics, precision engineering and chemicals, shrank by 10.7%. Singapore was officially in recession in Q3 2008.
Hong Kong has been badly hit by the crisis. House prices were down by an average of 6% in 2008. But during the last quarter, Hong Kong experienced a severe decline in prices of 14%.
In Makati, Philippines, prime 3-bedroom condominium prices fell by 2% during 2008, after an 11% price rise during 2007. Nevertheless construction of high-rise residential buildings continues, with residential condominium stock rising by 7% during 2008, according to Colliers Philippines.
Japan recorded modest Tokyo condominium price rises of 1.2% during 2008. On the other hand, land prices in Japan’s six major cities fell by 6% y-o-y to Sep-2008.
In Shanghai, China, house price rises slowed to 5% y-o-y by the end of 2008, after peaking at 30% y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional, and Xinhua News Agency reported house prices declines in 70 major cities during 2008. Shenzhen suffered the hardest fall, with prices down by 18% during 2008
UAE on shaky ground
In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41% during 2008. However during the year’s final quarter, prices fell by 8% in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.
Forecast: No recovery in 2009
History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.
The IMF has predicted that the world economy will grow by 0.5% in 2009, the lowest level in 60 years. GDP in advanced economies is expected to decline by 2% during 2009. The United Kingdom and Japan will be hit the hardest. Output in the UK may contract by 2.8%, while Japan’s may fall by 2.6%.
Growth in emerging economies is expected to slow to 3.3% in 2009, down from 6.3% in 2008. Developing Asia is forecast to be the least affected, with growth of 5.5%. China’s economy is predicted grow by 6.7% in 2009, but this is a substantial decline from 9% growth during 2008.
We cannot be optimistic for five reasons:
• Valuations still clearly remain stretched in most countries, in terms of price/rent ratios.
• Economic growth is slowing or negative in many countries, which is negative for housing values.
• There are no signs that banks are becoming more willing to lend.
• The unprecedented nature of the financial system’s collapse has greatly added to the difficulties facing the world’s housing markets.
• Some national governments are experiencing difficulty in refinancing their national debt, putting their currencies under pressure. Currency instability is likely to aggravate housing sector problems in countries where many loans were taken out in a foreign currency.
The positive news is that the US government and several others are acting with vigour, as has the IMF. Nevertheless, there is a long tough road ahead.
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House prices have risen to fast and to far Why? will there be a correction or crash like in the usa
Help answer the question about house prices
New England house prices? Is there ever really a good time to buy?I live in New Hampshire and I have been looking into buying a house. It seems to me that when house prices are low, interest rates are high, and when interest rates are low, house prices are high. Is there really a better time to buy a house compared to other times? Someone I know said we should wait because houses are not appreciating very well in the area right now, but, is this true? And is it better to continue renting? The prices in the area are outrageous at best, and I can't believe that there is ever going to be a time when they are going to be lower. It seems to me that if appreciation continues at any rate, that ordinary people wont be able to afford a house at all. $200,000 plus for a small place seems crazy. Any input on this?
Tags: bubble, crash, cycle, estate, finance, GEI, gold, Housing, London, market, Mortgage, property, UK
I'm 18 and live near London next to Heathrow airport. My boyfriend and I desperately want our own house. It'll take us about 5/6 years to save up and that is only if the house prices don't go up a lot within that time. Otherwise it could take us 8-10 years…It makes me feel sad…I can't answer anymore, it'll just stress me out : (
I live in the mid-atlantic. In 1988, we bought a townhouse for 92,500. The neighbors had bought theirs the year before for 130K. The prices stayed stagnant, even as other neighborhoods rose, because our townhouses were older. However, as all the land along our highway exit got built out, the value of our townhouses was seen – close to the highway, but surrounded by woods, roomy inside, bigger yards, lots of open space. In 2001, we bought a neighbor's townhouse for 116K and started renting out ours for 850/mo. In 2003, we sold the rental for 175K. In 2005, we sold the house bought for 116 for 325K. People tried to keep those prices going up, and some people bought at 350 – 370. (Lots of those homes were wonderfully remodeled, with the granite and hardwoods and upgraded baths people seek here.) Now, nothing is selling at all. Makes it hard to know what the value of those houses is, then, but around 300K is probably right.
Bottom line – as long as the neighborhood isn't going to hell, isn't majority rental property, isn't near some terrible future development or landfill, then over time the values will go up. There will be temporary stagnations or even drops in value, but the trend is relentlessly upward. You want to get in as soon as you can – as long as you don't buy at the top of the market. How to judge that? It's a guess, but you can make it an educated guess. Best options, if you have skills or money to spare, would be to get a fixer upper. If you can get the worst house in a good neighborhood, you can increase its value even while the market is stagnant. As soon as you can, get a rental property and start reaping those tax rewards.
it's not for nothing that the person you pay the rent check to is called the landLORD.
Nice work. keep it up. mean time come for social media marketing for esteembpo**com sdfsd
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I love it… i have been winging about high house prices for eight years to be told exactly what the speach bubbles say. Well now Ha ha ha the PRUDENT are being proved right.
bagariddum, good on ya! Here we have “Wanted Down Under”, a sickening BBC show where idiot Brits think about moving down under. No matter what their occupation they all seem to be able to earn £20k in Oz. And the TWAT presenter shows them houses costing £300k+. They all state that they want to be mortgage free, but they ALWAYS show them properties that would require a HUGE mortgage relative to their Oz salary. The BBC should be in JAIL for their part in this bubble. IN JAIL, WITH THE BANKS
good, all this nonsense about handing over half your wage (+) for 25 years to a bloody bank is a sick joke played by the lazy good for nothing land owners that have never done any real work and who only have the land due the thieving/murdering tendencies of their ancestral gene pool…inbred, pig ugly, buck toothed, parasites with largely franco/germanic heritage. time for a cull i think.
Depends on lots of factors but using pure economics you could assume:
When house prices are low, interest rates would also be low. This is because house prices would be low due to low demand for houses (high demand means house prices rise) therefore the demand for loans is low and the Banks must decrease interest rates to attract borrowers. The result should see an increase in the demand for houses as the cost of the loan is low and so price would start to increase.
Of course factors such as general economic cycle, unemployment, supply of houses and cash rate to the banks would impact as well.
Subprime was only the sneak preview of coming attractions. Next up for resets and recasts are Option ARMs, Alt-A, prime, jumbo prime, etc. Prime mortgage foreclosures are already up 29%. With resets and recasts peaking in 2010-2011, and not winding up until 2013, you do the math. Millions more properties are going into foreclosure over the next 4 years, and prices could drop another 30-50%.
Yes they really are. They have gone from ridiculously over stratospheric to merely stratospheric.
It's not really a good or bad thing because most of us still can't afford a home anyways.
Real Estate is a very local market. Just look at prices around the country, how prices have fallen at different rates around the country and you will see.
As for prices in NJ, again, it is locally centralized. Where I am in NJ, prices have increased the past year. There have been 3 sales of homes in my development this past year. Each sale has been higher than the last. The increase seems to be about 4% this past year. Now this increase is MUCH smaller than the double digit increases that were happening during the booming market of the past few years, but I am happy with the 4% increase.
One of the other answerer showed that in Morris county prices have declined. It just happens to be that where I am, it is still considered an up and coming part of the state (South Jersey, about 20 minutes from Philadelphia). It's far enough to be semi-rural but close enough to bring you right into the city when you want to be there.
As for a rise/drop in value, look at purchasing a property as it being your home. Use it as such. Compare buying to renting. A lot of this mess was people thinking "why put money into a landlord's pocket when I can buy and make money". You can see how that mentality got many people into foreclosures. Truly to buy a house you must be ready.
FIrst thing to consider is if it is the right time. Are you ready to lay down roots and stay in the same place for 5-7 years minimum. If you aren't going to own the house that long it isn't worth it. Remember, renting an apartment has no upfront costs. You pay a security deposit which is held until you move out then (it should be) returned.
Buying a house has closing costs associated with it. Be prepared to drop 4-6 percent of the price you are paying on closing costs. We're talking $4,000 for a $100,000 home. That is a significant investment. That is also money you don't get back. If you are going to put that kind of money out, be ready to stay a while.
Another thing to consider is are you financially ready? You should have truly a minimum of 20% of the purchase price to put down. I say this because this way you avoid having to take out 2 loans and you can avoid paying PMI for the house. This keeps money in your pocket.
If you haven't been able to save money now, you won't be able to when you get a house either. There are repairs that need to be done. these are repairs that you must pay for. No more calling someone to fix it and not worry anymore. Heater, roof, leaks, water heater, carpets, hardwood floors, you name it. All your job to fix.
I wish you luck!
duffduffbeerbeer, you’re right to hold fire, but it’s actually people your age who are in the most financial trouble because you have over-paid and propped up the bubble. People who paid £100k 8 or 9 years ago would still be selling to the likes of you for £200k even AFTER the price has fallen 25% since 2006 levels. Wait until the price is 3.5 times your salary. THAT is the right price. Alternatively, 80 times it’s monthly rent. If it could get £1k/month rent, the house is worth £80k…
real prices belong in the 3x avg salary bracket. for the uk thats another 50% drop required. in Oz it means another 60% drop. as this will be catastrophic for the banks (people just won’t pay ) govt will prop up this fall for long enough for it to meet wages coming up. thus levelling the drop over time, stagnating prices for 10 years. good for some (those hoping to sell investment properties for retirement) but for those that want to buy their first (not gambling) house in that time…tough.
Type this, 'how do housing prices affect the economy' into google.com as I did.
You'll have enough reading and learning to keep you up VERY late tonight.
Actually the home buyer decides what homes are selling for.
Ever heard " It's a Buyers market"homes prices are down.
"Its a Sellers market " home prices are up…
To get the percentage (2.7% ) they compare last month to (?) last years prices for example..Its the difference of what homes are selling for now ,compared to what these homes have sold for in the past
Live there and ride out the market. Whether a house goes up a bit or down it makes no difference to its suitability as a home. Equity whether large or small has zero value until converted into cash. Selling and wasting the money on rent is riskier than staying put. Maybe the market will go softer and then adjust back up at a more responsible pace. While that occurrs you still need a place to live. At least now you dont have resale costs, another list of fix it's to find when buying a new house, and you know what rate your loan is at. If you absolutely must sell, stage the home to show well and make it look like the best deal on the block.
dunno what the ‘credit crunch’ is supposed to be about, here in Oz i filled out a few ‘how much can we lend you’ mortgage calculators on banking websites. ALL of them quoted me a loan of between 8 and 9.5 times my salary!!
and yet small-med biz in the Uk can’t get lines of credit? sounds a bit like this depression is being induced and Oz is a bit behind, still trying to screw the last few saps into colossal debt before they baton down the hatches.
My seven year old son correctly answered the question “what comes next?”. He explained “mountains can’t go across like that”. Just goes to show how incompetent banks are.