Global house prices see weakest growth in four years

Hong Kong, where house prices are rising at the fastest rate in the world Photo: Phil Wiffen

Global house prices have suffered their weakest period of growth in four years, according to Knight Frank's new report, although Europe is no longer the world's worst region.

The flagship index, which ranks property value performances around the world, rose by just 0.1 per cent in the year to June 2015, the worst performance since the final quarter of 2011. Of the 56 housing markets tracked, 27 per cent recorded an annual decline in prices. Despite the poor performance, though, it remains a marked improvement upon four years ago, when almost half (44 per cent) saw prices fall.

Knight Frank attributes the weak growth to lingering concerns over the Eurozone economy, jitters in global stock markets and discussions of when, not if, a US rate rise will occur.

While China continues to show signs of concern, with prices dropping 5.7 per cent, Hong Kong leads global price growth, with values up 20.7 per cent year-on-year in Q2 2015. Turkey follows close behind with annual growth of 18.5 per cent. Estonia and Luxembourg and New Zealand complete the top five, just ahead of former chart leader Ireland, which has enjoyed significant rebound in real estate values in the past year.

"The recent volatility in the Chinese stock market has underlined the fragility of the Eurozone’s recovery and has pushed the likelihood of a rate rise by the US Federal Reserve further back – good news for homeowners in the US (and beyond) but bad news for corporate balance sheets," says Kate Everett-Allen, Head of International Residential Research for Knight Frank.

In Dubai, the slowdown continued, thanks to a strong US dollar and cooling measures, with mainstream residential prices falling by 2.8 per cent quarter-on-quarter and declining by 12.2 per cent in the year to June.

Most importantly, Europe is no longer the weakest-performing world region, a title it has held for 15 consecutive quarters: on average, prices across Europe increased by 2.8 per cent year-on-year with Turkey, Estonia, Luxembourg and Ireland all achieving double-digit annual price growth.