End Of Global House Price Boom?

Year 2007 had seen eventful and glorified moments for emerging markets such as Singapore, Hong Kong and Shanghai (China), where housing prices had shot up from 30% to 40%! However, things have changed dramatically since the sub-prime crisis erupted in US. By 1Q 2008, weighed down by the global credit crunch and high inflation, the global house price boom appears to have ended, according to Global Property Guide's latest survey of house price indicators.

According to the survey, only 13 countries in which dwelling price indices are regularly published saw prices rise during the year to end Q1 2008, while 21 countries saw dwelling prices fall in real terms, i.e., after adjusting for inflation. Even in most countries where house prices are not falling, they are clearly losing momentum.

It is interesting to note that when adjusted for inflation, many of these price rises look much less impressive. The world’s top-performing housing market (after inflation) was not China or Hong Kong or Singapore, but Slovakia, where real house prices rose by 29.3%.

The biggest house price fall was in Latvia, down -38.2% by May 2008 from a year earlier, after adjusting for inflation.

US prices also fell during the year to end of Q1, from -4.2% to -18.1%, after inflation.

In Europe, significant real house price falls also took place in Ireland (- 13.2%), Luxembourg (-5.8%), Portugal (-4.3%) and Malta (-4.9%).

UK house prices were only slightly down at end-Q1 from a year earlier, the house price crash having begun in earnest in early 2008. House prices fell during the first quarter by between - 0.7% to -2.1% (inflation-adjusted).

In Japan, the housing market appears to lose momentum once again. The urban land price index for 6 major cities was up only 4.1% year-on-year (2.9% after inflation), down from 7.8% over the same period in 2007 (7.9% after inflation).

The survey also concluded that loan volumes are likely to fall going forward. Therefore, it seems likely that the world’s house price momentum will continue to go down.

For the full story, please visit Global Property Guide.

As for Malaysia, it is likely that the impact will be less severe given the country's limited exposure to sub-prime related securities, relatively unharmed credit liquidity and the relatively cheaper property prices (relative to other major cities). However, a slowdown is imminent.