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The worldâ??s housing markets are showing signs of recovery, according to the latest survey of world-wide house price indices prepared by the Global Property Guide.

Seven countries have emerged from the house price slump (see below). However, most countries suffered sharp house price falls during the year to end-Q2 2009, so that the general situation remains negative. The Global Property Guide uses price-changes after inflation, giving a more realistic picture than the (more upbeat) nominal figures usually preferred by real estate agents. After experiencing declines in 2008, house prices in China, Portugal, Australia, New Zealand, France, Sweden and Hong Kong rebounded during the latest reported quarter, Q2 2009.

 

Seven countries are in recoveryIn Shanghai, China, house prices were up 1.96% during the year to end-Q2 2009. These gains occurred entirely during Q2 2009, when Shanghaiâ??s house prices rose 2.09%. Chinaâ??s house prices started falling in the last quarter of 2008, but a strong increase in government spending revived both the housing market and the economy, which has seen 7.1% GDP growth during the first half of 2009. Chinese  property prices are now widely expected to increase further.

 

Average house prices in the Algarve, Portugal, at EUR1,429 per square metre, were up by 2% during Q2 2009.  House prices in Portugal as a whole rose 1.01% during Q2, and were down only 0.43% on the year to end-Q2 2009, compared to -7.24% during the year to end-Q2 2008.  New construction orders in Portugal increased 12.3% during Q2 2009.

 

Australia and New Zealand saw house price increases of 3.73% and 3.31% respectively during Q2 2009. All regional capital cities in Australia registered quarterly house price increases, ranging from 2% to 5%. However, over the year to Q2 2009, there was a price decline of 2.80% in Australia. In New Zealand, the annual change is still negative at -3.07% in the year to end-Q2 2009. But in July 2009, New Zealand  had the first yearly house price increase since 2008.

 

After falling for the last five quarters, house prices in France were up by 3.31% during Q2 2009, thanks to government subsidies. In Sweden, house prices were up by 3.16% during Q2 2009. Hong Kongâ??s house prices increased by an average of 8.9% during Q2 2009.

 

The US housing market is strongerThe Case-Shiller house price index was up 0.35% during Q2 2009, from a decline 6.46% during the previous quarter, Q1 2009. Over the year to end-Q2 2009, house prices were down by 13.96%, an improvement from 18.51% fall year-on-year to Q1 2009.

 

The FHFAâ??s purchase-only index was however down by 1.74% during Q2 2009, somewhat worse than the 0.04% drop during Q1 2009, so the signals in the US are mixed.Over the year ending in the second quarter of 2009, seasonally-adjusted prices fell 5.03%.This was a lesser fall than in the year to end-Q1 (-9.16%) and than in the year to end Q4 2008 (-9.69%) (all figures inflation-adjusted).

 

Some countries avoided the crunchIsraelâ??s housing market has continued to sail through the global recession. The average price of houses rose 8.40% year-on-year to end-Q2 2009. But the quarterly increase in Q2 2009 was down to 1.02%, a drop from 5.52% in Q1 2009.

 

Switzerland saw an increase of 4.90% over the year to end-Q2 2009. However, house prices barely increased during Q2 2009.

 

The momentum signals improvement A key indicator of improvement is the marketâ??s momentum, i.e., the number of countries that did better this year, than during the previous year.  Nine countries improved their year-on-year performance to end Q2-2009, compared with the previous year.   In contrast during the year to end-Q1 2009, only six countries did better than the previous year.

 

Many countries are still sufferingThe Latvian housing market continues its extraordinary decline. Riga, the capital city, saw the average price of standard-type apartments drop 60.81% (inflation-adjusted) during the year to end-1H 2009. Prices dropped 26.75% during Q2 2009.  Demand for houses and apartments has been affected by high interest rates, which in June 2009 stood at 17.72% for credits to households.  Residential construction has been dismal since 2008, but in Q2 2009, the value of housing construction plunged 71.6% in comparison to the previous quarter.  Latviaâ??s overall economy shrank 18% y-o-y to Q1 2009, and its recession is predicted to continue until 2010.

 

The house price index for Dubai, UAE, fell 49.9% during the year to end-Q2 2009.  But quarterly data indicates that Dubaiâ??s downward house price spiral is moderating. House prices fell 8.92% in Q2 2009, much less than the 42% drop in Q1 2009.

Double digit year-on-year declines were also experienced in Bulgaria, Singapore, Iceland, UK, Japan, Denmark and South Africa. Most recent quarter declines in these countries range from 2% to 10%.

 

Nearing recovery?The International Monetary Fund has declared that global recovery has started. The three big economies of Japan, France and Germany have recently exited from recession. The emerging economies of Asia have revived, with China leading the pack. Whether this recovery will be sustained is the big question.

 

 

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Description:  The Global Property Guide is an on-line property research house.

 

Terms of Use: On-line newspapers, magazines, sites, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com. Sites and newspapers found not to be providing a link to us will be removed from our press list. 

 

Requests for Comments:Requests for comments are best made by telephone to 44-117 973 5492.

 

Publisher and Strategist:Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073Email: editor @ globalpropertyguide.com

 

Address: Global Property Guidehttp://www.globalpropertyguide.com  5F Electra House Building115-117 Esteban StreetLegaspi Village, Makati CityPhilippines 1229info @ globalpropertyguide.com

 

 

It has been a dismal year for house prices, according to the Global Property Guide’s latest survey of publicly-available house-price time-series for the year 2008. And seen from a global perspective, the downturn is still accelerating.The collapse of the world’s housing markets can be seen from three points of view, and unfortunately, all of them reinforce the bad news. During 2008, the downward price momentum accelerated, as compared to 2007. Only 2 countries saw positive momentum in 2008 (a slower downward house price movement than last year, or faster upward movement), while 28 countries saw their housing market momentum deteriorating, compared to the previous year. The two countries with a positive momentum were Germany and Switzerland. During 2008, house prices fell in most countries. During 2008 only 8 out of 32 countries saw house prices rise, after adjustment for inflation, while 20 countries experienced house price falls. In contrast, during the year 2007, the downturn was just beginning, and only 6 countries saw house prices fall, while 24 countries saw house prices rise (all figures inflation-adjusted).Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10% during 2008 were Latvia (Riga) (37%), Lithuania (Vilnius) (27%), the US (20%), the UK (18%), Iceland (16%), Ireland (12%), and the Ukraine (Kiev) (12%) (all figures inflation-adjusted). During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating. During 2008’s final quarter, 9 countries saw house price falls of 5% or more during just that quarter. Price drops of more than 10% during this single quarter occurred in three countries – in Latvia (Riga), which saw price falls of 15%, in Ukraine (Kiev) (13%), and in Hong Kong (15%). Other countries with Q4 house-price falls of 5% and over, included the UAE (8%), Lithuania (7%), Iceland (7%), Singapore (6%), Bulgaria (5%), and the UK (5%) (all figures inflation-adjusted, except UAE).These price falls were much greater than during the previous quarter, Q3. During that previous quarter, only two countries experienced house-price falls (inflation-adjusted) of 5% or more, and no countries experienced house-price falls of more than 10%. REGIONAL SURVEY BY GLOBAL PROPERTY GUIDEEurope has major problems The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37% during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70% in 2006. The most alarming decline took place in the 4th quarter, when prices declined by 15%, the steepest quarterly drop in real terms in any country. These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007. Average prices of apartments in Vilnius, Lithuania, fell by 27% during 2008. House prices started slowing in mid-2007, and crashed in early 2008.House prices in the UK plummeted by 18% in 2008. Although mortgage interest rates dropped slightly, to 4.48% in December 2008, the number of loan approvals for house purchases fell 58% in 2008. There is serious trouble in Iceland (house price fall of 16% during 2008), Ireland (12%), Ukraine (12%), Malta (9%), Portugal (8%), France (8%) Finland (7%), Norway (6%) and in Spain (6%). North America’s woes In the US, the centre of the global financial crisis, in 2008 house prices fell 20% according to the Case-Shiller house price index, which emphasizes urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6% and 3% respectively, during 2008. The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.Canada has been much less affected than the US.Pacific heads downBoth Australia and New Zealand saw house price declines during 2008, of 7% and 8% respectively. Asia no longer insulatedHousing markets in Asia have not been insulated. Singapore, Hong Kong and Philippines recorded house price falls during 2008. Singapore’s private residential prices dropped 9% during 2008, in sharp contrast to the 26% price increase of experienced during 2007. The developed countries’ economic troubles adversely affected Singapore’s exports, and during 2008, output in the manufacturing sector, particularly of electronics, precision engineering and chemicals, shrank by 10.7%. Singapore was officially in recession in Q3 2008.Hong Kong has been badly hit by the crisis. House prices were down by an average of 6% in 2008. But during the last quarter, Hong Kong experienced a severe decline in prices of 14%. In Makati, Philippines, prime 3-bedroom condominium prices fell by 2% during 2008, after an 11% price rise during 2007. Nevertheless construction of high-rise residential buildings continues, with residential condominium stock rising by 7% during 2008, according to Colliers Philippines. Japan recorded modest Tokyo condominium price rises of 1.2% during 2008. On the other hand, land prices in Japan’s six major cities fell by 6% y-o-y to Sep-2008. In Shanghai, China, house price rises slowed to 5% y-o-y by the end of 2008, after peaking at 30% y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional, and Xinhua News Agency reported house prices declines in 70 major cities during 2008. Shenzhen suffered the hardest fall, with prices down by 18% during 2008UAE on shaky groundIn Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41% during 2008. However during the year’s final quarter, prices fell by 8% in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers. Forecast: No recovery in 2009History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year. The IMF has predicted that the world economy will grow by 0.5% in 2009, the lowest level in 60 years. GDP in advanced economies is expected to decline by 2% during 2009. The United Kingdom and Japan will be hit the hardest. Output in the UK may contract by 2.8%, while Japan’s may fall by 2.6%. Growth in emerging economies is expected to slow to 3.3% in 2009, down from 6.3% in 2008. Developing Asia is forecast to be the least affected, with growth of 5.5%. China’s economy is predicted grow by 6.7% in 2009, but this is a substantial decline from 9% growth during 2008.We cannot be optimistic for five reasons:• Valuations still clearly remain stretched in most countries, in terms of price/rent ratios. • Economic growth is slowing or negative in many countries, which is negative for housing values.• There are no signs that banks are becoming more willing to lend.• The unprecedented nature of the financial system’s collapse has greatly added to the difficulties facing the world’s housing markets. • Some national governments are experiencing difficulty in refinancing their national debt, putting their currencies under pressure. Currency instability is likely to aggravate housing sector problems in countries where many loans were taken out in a foreign currency.The positive news is that the US government and several others are acting with vigour, as has the IMF. Nevertheless, there is a long tough road ahead. ###Description of the Global Property Guide: The Global Property Guide (http://www.globalpropertyguide.com) is an on-line property research house, specializing in analyzing residential property valuations around the world.Terms of Use: On-line newspapers, magazines, sites, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com Sites and newspapers found not to be providing a link to us will be removed from our press list. Requests for Comments:Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00Economics Team:Prince Christian Cruz, Senior EconomistPhone: (+632) 750 0560Email: prince@globalpropertyguide.comPublisher and Strategist:Matthew Montagu-Pollock Phone: (+632) 867 4220 Cell: (+63) 917 321 7073Email: editor@globalpropertyguide.comAddress: Global Property Guidehttp://www.globalpropertyguide.com 5F Electra House Building115-117 Esteban StreetLegaspi Village, Makati CityPhilippines 1229info@globalpropertyguide.com

Rents have moved up much less than prices in China over the past few years. As a result, in 5 cities in China – Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen â?? gross rental yields are now a modest 4.42%, based on a sample of high-end used apartments (www.globalpropertyguide.com).

Shanghaiâ??s gross rental yields average only 3.74%. These are lowest gross rental yields in our China sample, but then Shanghai is the only city where apartment selling prices have apparently not dropped, according to the China Real Estate Index System (CREIS) and eHomeday. Shanghai residential asking prices average US$2,742 per square metre (sq. m.).

Beijing apartments earn slightly higher gross rental incomes of around 4.21%. These are the countryâ??s most expensive apartments, with an average offer price of average US$2,977 per sq. m. for the high-end used apartments in our sample.

Chengdu also has rather low gross rental yields, an average of 3.88%. Chengdu apartments are the cheapest among the five cities, at US$1,060 per sq. m.

The highest rental yields are in Shenzhen, where apartments in our sample earn gross rental yields of 5.69%. The high-end used apartments in Shenzhen cost an average of US$ 1,780 per sq. m.

Guangzhou apartments earn mid-range gross rental yields of 5.41%. Our sample of Guangzhou apartment prices averages around US$1,577 per sq. m.

BACKGROUND IDEA â?? RENTAL YIELD

What does â??gross rental yieldâ? mean? Itâ??s very similar to the Price / Earnings (P/E) ratio in the stock market. Just as share prices have a P/E range, house prices tend to fluctuate around a rental yield range, research shows.

The gross rental yield is the annual rental earnings / the value of the property.

So if the rent is US$5,000 and the property is worth US$100,000, the yield is 5%.

Our rule-of-thumb is that a gross rental yield of 6% to 7% means a housing market is â??fairly valuedâ??, though importantly, developing country housing markets usually have higher yields than developed, because of structural issues discouraging housing purchase such as the difficulty of getting mortgage finance.

Where yields (and rental costs) are comparatively low:

· People will prefer to rent, rather than to buy

· Investors are unlikely to â??buy-to-letâ??

· Rents will tend rise faster than prices

Conclusion: No turnaround in Chinaâ??s residential prices likely soon.

When the Chinese housing market was roaring ahead, rents moved up much less than prices. With the current market downturn, rents have dropped together with property prices (though slightly less). Gross rental yields now average a modest 4.42%.

Why are Chinese rental yields so low? Prices in China surged till September 2007, and then paused â?? and have not substantially dropped since then, according to CREIS, which uses a hedonic methodology (eHomeday arrives at closely similar results).

How far do gross rental yields need to rise in China? Chinaâ??s gross rental yields of 4.42% are lower than would be expected in a developing economy. They are low, also, compared to other economies with similar income-per-capita.

We conclude that until one of two events occurs â?? more residential price falls, or substantial increases in rents – residential prices are unlikely to begin a sustained recovery in urban China.

The Chinese government has taken steps to support the market, such as temporarily suspending the business tax for residential property transfers, and encouraging cities to permit foreign purchases. Chinaâ??s economy remains relatively strong, because of prompt government measures. Consumption spending is strong, restaurants are full, optimism remains high.

However, gross rental yields are still too low. Therefore, it is unlikely that there will be a convincing upturn in Chinese residential prices soon, the Global Property Guide believes.

Description:

The Global Property Guide is an on-line property research house.

Terms of Use:

On-line newspapers, magazines, sites, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com Sites and newspapers found not to be providing a link to us will be removed from our press list.

Requests for Comments:

Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00

Publisher and Strategist:

Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Email: editor@globalpropertyguide.com

Address:

Global Property Guide

http://www.globalpropertyguide.com

5F Electra House Building

115-117 Esteban Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com

Rents have moved up much less than prices in China over the past few years. As a result, in 5 cities in China – Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen â?? gross rental yields are now a modest 4.42%, based on a sample of high-end used apartments (www.globalpropertyguide.com).

Shanghaiâ??s gross rental yields average only 3.74%. These are lowest gross rental yields in our China sample, but then Shanghai is the only city where apartment selling prices have apparently not dropped, according to the China Real Estate Index System (CREIS) and eHomeday. Shanghai residential asking prices average US$2,742 per square metre (sq. m.).

Beijing apartments earn slightly higher gross rental incomes of around 4.21%. These are the countryâ??s most expensive apartments, with an average offer price of average US$2,977 per sq. m. for the high-end used apartments in our sample.

Chengdu also has rather low gross rental yields, an average of 3.88%. Chengdu apartments are the cheapest among the five cities, at US$1,060 per sq. m.

The highest rental yields are in Shenzhen, where apartments in our sample earn gross rental yields of 5.69%. The high-end used apartments in Shenzhen cost an average of US$ 1,780 per sq. m.

Guangzhou apartments earn mid-range gross rental yields of 5.41%. Our sample of Guangzhou apartment prices averages around US$1,577 per sq. m.

BACKGROUND IDEA â?? RENTAL YIELD

What does â??gross rental yieldâ? mean? Itâ??s very similar to the Price / Earnings (P/E) ratio in the stock market. Just as share prices have a P/E range, house prices tend to fluctuate around a rental yield range, research shows.

The gross rental yield is the annual rental earnings / the value of the property.

So if the rent is US$5,000 and the property is worth US$100,000, the yield is 5%.

Our rule-of-thumb is that a gross rental yield of 6% to 7% means a housing market is â??fairly valuedâ??, though importantly, developing country housing markets usually have higher yields than developed, because of structural issues discouraging housing purchase such as the difficulty of getting mortgage finance.

Where yields (and rental costs) are comparatively low:

· People will prefer to rent, rather than to buy

· Investors are unlikely to â??buy-to-letâ??

· Rents will tend rise faster than prices

Conclusion: No turnaround in Chinaâ??s residential prices likely soon.

When the Chinese housing market was roaring ahead, rents moved up much less than prices. With the current market downturn, rents have dropped together with property prices (though slightly less). Gross rental yields now average a modest 4.42%.

Why are Chinese rental yields so low? Prices in China surged till September 2007, and then paused â?? and have not substantially dropped since then, according to CREIS, which uses a hedonic methodology (eHomeday arrives at closely similar results).

How far do gross rental yields need to rise in China? Chinaâ??s gross rental yields of 4.42% are lower than would be expected in a developing economy. They are low, also, compared to other economies with similar income-per-capita.

We conclude that until one of two events occurs â?? more residential price falls, or substantial increases in rents – residential prices are unlikely to begin a sustained recovery in urban China.

The Chinese government has taken steps to support the market, such as temporarily suspending the business tax for residential property transfers, and encouraging cities to permit foreign purchases. Chinaâ??s economy remains relatively strong, because of prompt government measures. Consumption spending is strong, restaurants are full, optimism remains high.

However, gross rental yields are still too low. Therefore, it is unlikely that there will be a convincing upturn in Chinese residential prices soon, the Global Property Guide believes.

Description:

The Global Property Guide is an on-line property research house.

Terms of Use:

On-line newspapers, magazines, sites, etc wishing to use material from this press release MUST provide a clickable link to www.globalpropertyguide.com Sites and newspapers found not to be providing a link to us will be removed from our press list.

Requests for Comments:

Requests for comments are best made by telephone to +(63) 917 321 7073. UK-based callers should telephone before lunchtime. Our local time is Hong Kong time, i.e., standard time + 8.00

Publisher and Strategist:

Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Email: editor@globalpropertyguide.com

Address:

Global Property Guide

http://www.globalpropertyguide.com

5F Electra House Building

115-117 Esteban Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com