Bloomberg - Home prices worldwide may continue to slow

Home prices worldwide may continue to slow
Bloomberg News

Published: August 14, 2006 … ce0814.php

The growth of home prices worldwide may continue to slow into next year as higher borrowing costs dampen demand, said Knight Frank, an international adviser on real estate.

Global house prices rose 8.5 percent in the year through June, compared with a 12.3 percent gain in the previous 12 months, the London-based agency said in an e-mailed statement Aug. 14. Price growth slowed in 18 of the 30 countries covered in the survey.

“Our forecast is that we will see continued slowing of average global house price growth over the rest of 2006 and into 2007,” Liam Bailey, head of residential research at Knight Frank, said in the statement. “This wider trend will mask regional hotspots and investment opportunities.”

Interest rates have been rising around the world as central bankers try to prevent quickening economic growth from spilling over into higher inflation.

The Bank of England unexpectedly raised its benchmark rate on Aug. 3 to 4.75 percent from 4.5 percent, the first increase in two years, citing “inflationary pressures.” Australia raised its benchmark rate a quarter of a percentage point, to 6 percent, on Aug. 2. And the U.S. Federal Reserve has increased rates 17 times, to 5.25 percent from 1 percent, since June 2004.

The worldwide slowdown in home growth first started in 2003 in Australia and Britain, Knight Frank said. Australian home price growth has begun to rebound, gaining 3.7 percent last year, up from 1.9 percent the year before. In Britain, the slowdown continued, to 4.8 percent growth, from 6.1 percent a year earlier.

In the past year, the growth of residential property prices in the United States, France and Ireland also have slowed. U.S. prices gained 9.4 percent, compared with 14.1 percent growth the year before; French home price growth slowed to 9.4 percent from 15.3 percent; and Irish prices gained 9.4 percent, compared with 10.1 percent growth the previous year.

In Hong Kong, prices are falling, down 2.4 percent in the year to June 30, compared with a 22.5 percent jump in the previous 12 months, Knight Frank said in its second quarterly index.

The biggest drop in prices was recorded in Belgrade, the capital of Serbia. Prices dropped 5.1 percent in the 12 months to the end of the second quarter. That was less than the 14.8 percent slump in the previous year.

Riga, the capital of Latvia, had the biggest rise in prices. Prices there gained 45 percent in the year to June 30, after jumping 74 percent in the previous year.

Moscow likely will lead the rebound in price growth among the world’s biggest cities, Bailey said. “Moscow will eventually rival London as the most expensive world city within five years.”

German residential properties also will show “sustained growth from next year,” he said.

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