Global house prices are still falling in many countries four years after the downturn and the peak of the property bubble, according to a survey by the International Monetary Fund (IMF).
The outlook still looks gloomy for many of the world’s strongest economies with Europe particularly suffering from the rapid decrease in global house prices, says the IMF, but some markets have started to pick up again – with the USA and Brazil seeing some of the biggest price hikes.
With the Eurozone almost at breaking point, it’s no surprise that many European countries have seen house prices fall dramatically over the past year. The biggest falls were in countries which recently received bailouts, with Ireland being hit the worst as prices there dropped by 16%.
Other Eurozone strugglers like Greece, Portugal and Spain fared badly as well, as prices dropped by 10% or more year-on-year. Bigger economies like France, Italy and the UK also suffered decline in their house prices over the past year.
Despite the worrying trends, there were some increases in house prices particularly for countries that are outside of the Eurozone and the EU.
Brazil is world’s property hotspot
The nation with the largest house price increase was the Ukraine, where home values were up by nearly 10%. Norway, Switzerland and Malta all reported significant growth – and notably all have remained outside the Eurozone.
Property markets in developing economies have shrugged off the slump and have seen house prices soar over the last 12 months.
The major hotspot is in Brazil where the house prices soared by 15% in the last year.
Property prices in Latin America have rocketed in comparison to stagnation in Europe as significant increases were also seen in Uruguay and Colombia where prices rose by a minimum of 5%.
The Far East also continued to resist the global economy slump as many countries here saw a rise in their house prices.
Philippines best Asian house price performer
The Philippines saw the biggest rise in the region as house prices rose by around 9%. On the Asian mainland, home prices were up in Malaysia, Hong Kong and India – all showing 5% jumps in value over the year.
“The findings suggest that long-run price dynamics are mostly driven by local fundamentals such as income and population growth. The effect of more globally connected factors such as interest rates appears to be less strong,” says the report.
“Credit market conditions may cause short-run deviations from long-run equilibrium and, ultimately, when the correction starts, as it did in the most recent episode, financial stability and the overall economy bear important consequences in terms of credit institutions coming under stress and slowing real economic activity. The severity of the ultimate impact depends on various factors including structural characteristics of housing and mortgage markets.
“If past is prologue, the ongoing house price corrections could average about 23% and be spread out over a period of 4-4.5 years from peak to trough. “