Investment Analysis

Global housing markets poised to slow, but strong house price rises continue in Europe and parts of Asia

During 2018:

  • House prices rose in 24 out of the 45 world's housing markets which have so far published housing statistics. House prices fell in 21 of those 45 countries.
  • The more upbeat nominal figures, more familiar to the public, showed house price rises in 35 countries, and declines in 10 countries.
  • However, 29 of the surveyed housing markets showed weaker momentum in 2018 compared to the previous year, suggesting that global house price growth is now decelerating.


Most of Europe and parts of Asia continue to experience strong price rises. There have also been notable increases in Singapore, Russia and Qatar. But Hong Kong, China, Sweden, Montenegro, Turkey and most of the Middle East have experienced either house price falls - or a sharp deceleration of house price rises.

The strongest housing markets in our global house price survey during 2018 included: Malta (+10.48%), Makati CBD, Philippines (+9.91%), Netherlands (+8.49%), Singapore (+7.32%), and Chile (+6.94%), using inflation-adjusted figures.

The biggest y-o-y house-price declines were in Egypt (-19.24%), Turkey (-8.82%), Dubai, UAE (-8.22%), Kiev, Ukraine (-6.09%), and Beijing, China (-3.73%), again using inflation-adjusted figures.

Momentum is much weaker. Only 16 of the world's housing markets for which figures are available showed stronger upward momentum during 2018, while 29 housing markets showed weaker momentum, according to Global Property Guide's research. Momentum is a measure of the "change in the change"; simply put, momentum has increased if a property market has risen faster this year than last (or fallen less). Momentum has weakened in almost two-thirds of the housing markets covered in our survey.

Inflation-adjusted figures are used throughout this survey. In the case of Kiev, Ukraine, the Global Property Guide adjusts using the official U.S. inflation rate since Ukrainian secondary market dwelling sales are denominated in U.S. dollars.

Source: Various series, data descriptions and sources here

The strongest performing markets:

Malta is now the strongest housing market in our global survey, with residential property prices rising by 10.48% during 2018, after y-o-y rises of 7.39% in 2017, 12.71% in 2016, 8.67% in 2015, 4.33% in 2014, and 5.34% in 2013, using inflation-adjusted figures. During the latest quarter, property prices rose by 5.7% q-o-q. Malta's economy is projected to grow by 5.2% this year – the fastest pace in the EU and about three times as much as the union’s average growth.

All figures that follow are inflation-adjusted.

The Philippines’ great house price boom continues with the average price of 3-bedroom condominium units in Makati CBD rising by 9.91% during 2018, after y-o-y rises of 7.34% in 2017, 7.54% in 2016, 12.58% in 2015, 5.1% in 2014, 10.22% in 2013 and 39.18% in 2012. Housing prices increased strongly by 5.55% during the latest quarter. After expanding by 6.2% last year, the Philippine economy is expected to grow at a faster pace of 6.7% this year.

The Netherlands' housing market continues to rise strongly, with the average purchase price of all dwellings rising by 8.49% during 2018, up from the previous year's 6.92% growth. On a quarterly basis, house prices were up 2.14% during the latest quarter. The strong house price rises were mainly attributed to robust demand, coupled with lack of adequate housing supply in the market. The Dutch economy grew by 2.5% in 2018 and is expected to expand by another 1.7% this year.

Singapore's housing market made a surprise comeback, after four years of house price falls, thanks to strong demand and a healthy economy. House prices rose by 7.32% during 2018, a sharp improvement from a miniscule y-o-y growth of 0.79% in 2017. Quarter-on-quarter, house prices were almost unchanged during the latest quarter. The economy is expected to grow by 2.5% this year, from expansions of 3.2% in 2018 and 3.9% in 2017.

Chile's housing market continues to grow stronger, despite the introduction of a property sales tax in 2016. The average price of new apartments in Greater Santiago rose by 6.94% during 2018, a slight improvement from the previous year's 6.69% y-o-y expansion. Quarter-on-quarter, house prices rose by 1.88% in Q4 2018. After a robust growth of about 4% last year, Chile’s economy is projected to expand by 3.4% this year.

Source: Various series, data descriptions and sources here

THE REGIONS:

Europe remains vibrant

European house price rises continue unabated. House prices have risen in no less than 14 of the 23 European housing markets for which figures were available during 2018.

Malta's housing market is growing at breakneck speed, buoyed by its very strong economy, coupled with the introduction of the Individual Investor Programme (IIP) and stamp duty exemption for first-time buyers. Residential property prices rose by 10.48% during 2018, after y-o-y rises of 7.39% in 2017, 12.71% in 2016, 8.67% in 2015, 4.33% in 2014, and 5.34% in 2013. During the latest quarter, property prices rose by 5.7% q-o-q. Malta's economy is one of the most dynamic in the EU, growing by a robust 6.2% in 2018, according to the European Commission. Malta's economy is projected to grow by 5.2% this year – the fastest pace in the EU and about three times as much as the union’s average growth.

The Netherlands' housing market remains strong, mainly due to robust demand, coupled with lack of adequate housing supply in the market. The average purchase price of all dwellings rose by 8.49% during 2018, up from the previous year's 6.92% growth. On a quarterly basis, house prices were up 2.14% during the latest quarter. During 2018, home sales dropped 9.7% from a year ago, in contrast to a 13% growth in 2017. The decline in sales was mainly due to worsening supply shortages. The housing shortage in the Netherlands was estimated at about 200,000 units this year. The Dutch economy grew by 2.5% in 2018, buoyed by strong consumption, investments and exports, according to the CBS. GDP is expected to grow by 1.7% annually in 2019 and 2020, according to the European Commission.

Long a picture of housing market stability, Germany was one of the few countries that avoided a house-price slump in the wake of the 2008-2009 global financial crisis. Since then, extremely low interest rates have encouraged demand. The average price of apartments rose by 6.78% during 2018, an improvement’s from last year’s 4.45% growth. On a quarterly basis, house prices increased 1.39% in Q4 2018. Though, Germany’s economy slowed sharply in 2018, growing by just 1.5%, down from a 2.2% growth in 2017 and the weakest expansion in five years, mainly due to weaker exports as a result of global economic uncertainty caused by the Brexit and the US-China trade tensions, among others. Economic growth is expected to slow further to 1.1% this year.

Other strong European housing markets included Ireland, with house prices rising by 5.81% during 2018, Portugal (5.39%), Slovak Republic (5.27%), Spain (5.25%), Romania (3.07%) and Iceland (3.04%). All, except Iceland, recorded positive quarterly growth during the latest quarter. Though in terms of momentum, only Portugal, Slovak Republic and Spain had stronger performances in 2018 compared to the previous year.

Minimal annual house price rises during 2018 were registered in Lithuania (2.01%), Riga, Latvia (1.33%), Russia (0.99%), Montenegro (0.15%) and Estonia (0.04%). All, except Montenegro, saw quarterly growth during the latest quarter. Only Lithuania and Russia performed better in 2018 compared to the previous year.

Europe's weakest housing markets

Turkey's housing market continues to weaken, amidst a weak currency (the lira), record-high inflation, and political conflict with the US. Nationwide residential property prices fell by 8.82% during 2018, far worse than the previous year's 0.71% decline. On a quarterly basis, house prices increased slightly by 0.91% during the latest quarter.

In January 2019, inflation stood at 20.35%, up from 20.3% in the previous month and 10.35% a year earlier. The Turkish lira plunged to record lows, having shed almost 45% of its value against the US dollar during the past three years. The economy is expected to expand by a meagre 0.4% this year, after average annual growth of 6.5% from 2010 to 2018, according to the IMF.

Ukraine's housing market remains depressed, despite improved economic conditions. Secondary market apartment prices in Kiev fell by 6.09% (inflation-adjusted) during 2018, to an average price of US$ 1,049 per square metre (sq. m.) – compared to a y-o-y decline last year of 7.97% in 2017. House prices fell by 1.45% q-o-q in Q4 2018.

House prices in Ukraine have been falling during the past five years, particularly in 2014 (with prices plunging 37.38%) because of the devaluation of the hryvnia due to the Russian war. Ukraine's economy is expected to expand by 2.5% this year, according to the National Bank of Ukraine, after expansions of 3.5% in 2018, 2.5% in 2017 and 2.4% in 2016, and contractions of 9.8% in 2015, 6.6% in 2014 and 0.03% in 2013.

Sweden's house price boom is over, amidst falling demand and supply. The nationwide house price index fell by 3.55% during 2018, in sharp contrast with the y-o-y rise of 5.7% in the previous year. Quarter-on-quarter, house prices dropped 0.19% during the latest quarter. Homes sold in one- to two-dwelling buildings fell by 4.9% y-o-y to 52,299 units in 2018. Likewise, dwelling starts fell by 19.8% and completions dropped 5.1% in 2018 from a year earlier. Recently, the National Institute of Economic Research revised downwards its 2019 growth projections for Sweden to just 1.3%, from an earlier forecast of 1.9%, amidst a decline in housing investment.

Other weak European housing markets included Macedonia, with house prices falling by 3.51% during 2018, Switzerland (-2.56%), Norway (-1.05%), UK (-0.79%), Finland (-0.56%) and Jersey (-0.4%). Only Jersey saw quarterly growth during the latest quarter. All showed weaker performance in 2018 as compared to the previous year.

The Asia-Pacific region is two-tiered

Two of the five strongest housing markets in our global survey are in Asia-Pacific - Philippines and Singapore. However, house prices rose in just over half of the 11 housing markets for which figures were available during 2018.

The Philippines is now in its seventh year of house price boom, amidst strong economic growth. The average price of 3-bedroom condominium units in Makati CBD rose by 9.91% during 2018, after y-o-y rises of 7.34% in 2017, 7.54% in 2016, 12.58% in 2015, 5.1% in 2014, 10.22% in 2013 and 39.18% in 2012. Housing prices increased strongly by 5.55% during the latest quarter. The Philippine economy expanded by 6.2% in 2018, lower than the average annual growth rate of 6.6% from 2012 to 2017 but still among the fastest growing economies in Emerging Asia. The economy is expected to grow at a faster pace of 6.7% this year, amidst improving macroeconomic conditions and slowing inflation.

Singapore's house price rises continue to accelerate, buoyed by strong demand. House prices rose by 7.32% during 2018, a sharp improvement from a y-o-y growth of 0.79% in 2017. Quarter-on-quarter, house prices were almost unchanged during the latest quarter. Economic growth for the export-reliant country is expected to slow this year to 2.5%, from expansions of 3.2% in 2018 and 3.9% in 2017, mainly due to a projected decline in manufacturing and exports sector, amidst global trade tensions.

Macau’s housing market remains strong amidst massive infrastructure investments, which will transform Macau's connections to China and Hong Kong. The average transaction price of residential units rose by 4.4% during 2018, almost at par with the prior year’s 4.93% growth. However, house prices fell by 1.55% q-o-q during the latest quarter. The economy is expected to grow by 6.3% this year and by another 5.8% in 2020.

Modest to minimal house price rises during 2018 were registered in Thailand (3.58%), Taiwan (1.92%) and Tokyo, Japan (0.61%). All recorded positive quarterly growth during the latest quarter. In terms of momentum, both Thailand and Taiwan had stronger performances in 2018 compared to a year earlier.

Some Asian nations remain weak

China's housing market is cooling rapidly, with new regulatory and monetary policies impacting developers and speculative buyers. In Beijing, the price index of second-hand houses fell by 3.73% during 2018 compared to the previous year's 3.32% y-o-y decline. During the latest quarter, house prices in Beijing fell by 1%. In Shanghai, prices of second-hand houses also fell 4.26% y-o-y and 0.37% q-o-q over the same period.

The Chinese economy grew 6.6% in 2018, the slowest pace in 28 years, amidst its ongoing trade war with the US. Economic growth is expected to slow further to 6.2% this year, according to the IMF.

Hong Kong's house price boom is over, with residential property prices falling by 0.92% during 2018, in sharp contrast to a y-o-y rise of 12.78% in 2017. On a quarterly basis, house prices dropped sharply by 8.73% in Q4 2018. The recent slowdown was mainly due to slowing demand from Chinese homebuyers, deteriorating affordability, rising mortgage rates, as well as the adverse impact of the ongoing global trade tensions. 

Hong Kong’s government has leaned against property price rises in recent years. The government raised stamp duties for all non-first time homebuyers starting November 2016 and cut allowable loans on residential and commercial properties in May 2017. In June 2018, Chief Executive Carrie Lam revealed another series of cooling measures, including a tax against vacant flats. As a result in 2018, sales of both new and existing homes fell by 16% and 3%, respectively. After economic growth of 3.8% in 2017, the highest expansion since 2011, the government estimates that HK’s economic growth reached only 3% last year.

Other weak Asia-Pacific housing markets included Indonesia, with house prices falling by 0.19% during 2018, South Korea (-0.17%) and New Zealand (-0.07%). Both South Korea and New Zealand saw quarterly growth during the latest quarter. All showed weaker performance in 2018 as compared to the previous year.

Middle East's housing markets continue to struggle

The Middle East is now in the doldrums, with two of the three weakest housing markets in our global house price survey in the region: Egypt and UAE. This is not surprising given the region's ailing economy due to low oil prices and the ongoing political and diplomatic crisis.

Egypt is now the weakest housing market in our global survey, with the nationwide real estate index plunging by 19.24% in 2018 from a year earlier, after y-o-y changes of -11.49% in 2017, 1.19% in 2016, -14.22% in 2015 and 1.14% in 2014. Nominal house prices also fell by 9.58% y-o-y in 2018. Real house prices dropped 16.84% q-o-q during the latest quarter.

President Abdel Fattah el-Sisi recently removed the last restrictions on foreign ownership of land and property in Egypt, in an effort to buoy the housing market. He also allowed the government, the biggest landowner in Egypt, to use its land for public-private partnership schemes. The economy expanded by 5.5% in Q2 of FY 2018/19, up from the previous year’s 5.3% growth and the fastest pace in a decade, according to Planning Minister Hala el Saeed.

Other Middle Eastern housing markets are also depressed. In Dubai, residential property prices fell by 8.22% during 2018, worse than last year's 5.23% decline, amidst weak economic growth, low investor sentiment, and an oversupply of housing. During the latest quarter, house prices in Dubai dropped 1.98% q-o-q.

Likewise, Qatar's housing market continues to struggle, amidst a sharp economic slowdown and the adverse impact of the diplomatic crisis. The nationwide real estate price index dropped 2.24% during 2018, after last year's 10.42% y-o-y decline. Property prices fell slightly by 0.22% q-o-q during the latest quarter.

Israel's decade-long house price boom is now over, with government cooling measures intensifying. The nationwide average price of owner-occupied dwellings dropped 3.25% during 2018, in contrast to the previous year's 2.19% growth. In fact, it was the biggest y-o-y decline in twelve years. Israeli house prices dropped 0.78% q-o-q in Q4 2018.

The Americas are mixed

U.S. house prices continue to rise, albeit at a slower pace. Canada's almost decade–long housing boom is finally over. In Latin America, Chile is strengthening while Mexico continues to improve. Brazil, on the other hand, remains depressed.

After six years of strong house price growth, the U.S. housing market is now gradually cooling. The S&P/Case-Shiller seasonally-adjusted national home price index rose by 2.76% during 2018 (inflation-adjusted) – the lowest growth since 2011. House prices increased 0.3% during the latest quarter. The Federal Housing Finance Agency's seasonally-adjusted purchase-only U.S. house price index increased 3.45% y-o-y in 2018 (inflation-adjusted), a slowdown from annual rises of 4.6% in 2017, 4.35% in 2016, and 5.14% in 2015. The FHFA index rose by 1.17% q-o-q during the latest quarter.

Demand and construction activity are now falling. Sales of new single-family houses were down 7.7% y-o-y to a seasonally-adjusted annual rate of 657,000 units in November 2018. Likewise, existing home sales fell by 10.3% y-o-y to 4.99 million units in 2018. In November 2018, new housing starts fell by 3.6% y-o-y to a seasonally-adjusted annual rate of 1,256,000 units, while completions were down 3.9% to 1,099,000 units. Building permits authorized for new housing units rose by a meagre 0.4% y-o-y to 1,328,000 units in November 2018. U.S. homebuilder sentiment declined to just 54 in December 2018, well below the previous year’s level of 74 and actually the lowest reading since May 2015.

The U.S. economy grew by 3% in 2018 from a year earlier, up from an expansion of 2.2% in 2017 and actually the fastest pace since 2005, according to the U.S. Federal Reserve. However, the world’s biggest economy is expected to slow in the coming years, with projected GDP growth rates of 2.3% this year, 2% in 2020 and 1.8% in 2021, mainly due to the ongoing trade war.

House prices in Canada's eleven major cities rose by a meagre 0.51% during 2018, a sharp slowdown from last year's 6.92% growth. In fact, it was the lowest annual increase since 2008. Quarter-on-quarter, house prices declined 0.73% in Q4 2018. Demand is falling. Actual sales activity plunged by 19% in December 2018 from a year earlier. Overall, sales were estimated to have fallen by 11.2% y-o-y to 458,200 units in 2018, led by declines in activity in British Columbia and Ontario. Likewise, dwelling starts fell by 3.1% y-o-y to 212,843 units in 2018.

The Canadian Real Estate Association (CREA) expects home sales to fall slightly by 0.5% to 456,000 units this year, amidst the introduction of another set of market-cooling measures, against a backdrop of rising mortgage interest rates. The Bank of Canada (BoC) raised its key rate by 25 basis points to 1.75% in October 2018, after raising it four times since July 2017. The Canadian economy was estimated to have expanded by 2.1% in 2018, a slowdown from the preceding year’s 3% growth, mainly due to its ailing oil and gas industry. Bank of Canada expects economic growth to slow further to 1.7% this year before partially rebounding to 2.1% in 2020.

Latin America: Mexico and Chile continue to grow stronger; Brazil remains depressed

Chile's housing market continues to grow stronger, despite the introduction of a property sales tax in 2016. The average price of new apartments in Greater Santiago rose by 6.94% during 2018, a slight improvement from the previous year's 6.69% y-o-y expansion. Quarter-on-quarter, house prices rose by 1.88% in Q4 2018.

Mexico's housing market continues to improve, with the nationwide house price index rising by 2.92% during 2018, a remarkable improvement from a meagre growth of 0.73% in 2017. However on a quarterly basis, house prices dropped 1.1% during the latest quarter.

Brazil's housing market continues to struggle, despite improving economic conditions. In Sao Paulo, house prices fell by 1.89% during 2018, from annual declines of 1.5% in 2017, 5.53% in 2016, and 7.38% in 2015. On a quarterly basis, house prices in Sao Paulo fell slightly by 0.14% in Q4 2018.

South Africa's housing market remains sluggish

South Africa's housing market remains sluggish, amidst economic uncertainty. The price index for medium-sized apartments fell by 0.8% during 2018, after y-o-y declines of 0.77% in 2017 and 2.1% in 2016 and meagre growth of 0.91% in 2015 and 0.99% in 2014. On a quarterly basis, house prices dropped 0.46% in Q4 2018. The economy grew by about 0.8% in 2018, after growth of 1.3% in 2017 and 0.6% in 2016, according to the IMF. Recently, the World Bank slashed its 2019 growth projection for South Africa’s economy to 1.3%, from its earlier estimate of 1.8%, amidst constraints on domestic demand and limited government spending.