The Australian real estate market is experiencing a period of sluggish growth and activity, but property values are performing strongly when compared to our overseas counterparts.
The Global Property Guide’s latest survey of house prices, which uses price changes after inflation to gain a more realistic picture, reveals an uneven recovery in global housing markets during the 12 months to June 2010.
Over that period, 18 countries had house price increases and 18 countries had price declines.
Europe presented mixed results, with Finland (up 9%) defying the downward trend of decline experienced throughout Ireland, Bulgaria, Lithuania, Iceland, Russia, Croatia, Spain and Slovakia.
In the US, house prices fell 3.31% over the year, while Canadian house prices were up 1.47%.
Singapore performed best overall, with a 34% house price increase recorded between June 2009 and June 2010. House prices in Hong Kong, Taiwan and China also surged 21.4%, 11.51% and 5.78% respectively.
Strong economic growth, low interest rates and increases in foreign demand fuelled house prices in these four countries, raising fears of a property bubble. In June the International Monetary Fund warned that the booming Asian real estate markets “may pose risks to financial stability.”
In response, Singapore, Hong Kong, Taiwan and China all swiftly tightened credit supply by lowering the loan-to-value ratio. Singapore and Hong Kong have also increased land supplies, and China has increased the down payment requirement for second-home mortgages to 50%.
Closer to home, the July RP Data-Rismark Hedonic Home Value Index confirms that Australian property values are holding their own.
“In the period between end 2008 and March 2010, Australian home values rose by 16.3%,” says RP Data’s research director, Tim Lawless.
In the month of July Australian home values remained virtually unchanged, recording an increase in value of 0.1% for the month. Annually, house prices jumped 9.7% in the 12 months to June – and Lawless believes the outlook for the rest of the year remains positive.
“There is the possibility of modest gains,” he says, “if mortgage rates remain in check and economic conditions continue to improve.”