Olympic Games and London Property Prices

South Africa may be scooping gold medals at the Olympic Games, but experts are uncertain of the immediate Olympic boost to London property prices.


South Africa may be scooping gold medals at the Olympic Games, but experts are uncertain of the immediate Olympic boost to London property prices.

According to Mike Smuts, managing director of Smuts & Taylor Ltd, it would seem from the available data that the Olympics have had little effect on East London property prices.

He points out that it’s a little early for judgement, but there is of course always a big debate about whether events such as the Olympics Games actually have a direct effect on property prices in the host city.

Speaking to Property24.com, Smuts explains that some earlier research has shown that the Olympics may aid property values in developing cities, but has little to no effect on developed metropolitan areas like London.

Knight Frank revealed in a report recently that prime central London property prices reached a new high in June with values almost 50 percent higher than they were in March 2009.

Engel & Völkers in Chelsea, London said at the time many landlords and buy-to-let investors were spotting opportunities for short-term rentals during the Olympic Games hence boosting the rental market.

Click here to read the article.

“One thing that is undisputed though is that hosting cities benefit from an upgrade of transport, cultural/leisure facilities and urban infrastructure, which in turn encourages house prices growth.”

He notes that all of this is true for London saying the “Olympic Legacy”, as the government has dubbed it, will lie in these infrastructure upgrades and not in the event itself.

Smuts says some of the infrastructure improvements are already complete, including parts of the £6.5 billion ($10 billion) investment in London’s transport system, as well as private ventures such as the £1.5 billion Stratford City Westfield Shopping Centre.

“Housing projects are still taking shape and until those developments are complete, it’s too soon to look for an Olympic housing boom,” he says.

Smuts says some of the infrastructure improvements are already complete, including parts of the £6.5 billion ($10 billion) investment in London’s transport system, as well as private ventures such as the £1.5 billion Stratford City Westfield Shopping Centre.

Yolande Barnes, director of Savills residential research explains that the real legacy for the housing market in Stratford will start after the Olympics, and any ripple would follow thereafter.

Barnes says transactions in the London Borough of Newham are running among the lowest in the country – at around 40 percent of their former average levels and it is difficult to discern any price rises above and beyond the background rises in London as a whole.

Over the longer term, the infrastructure improvements and general ‘speeding up’ of regeneration and management of place that has happened because of the Olympics will undoubtedly have a positive effect on local house prices, she says.

“Perhaps more importantly it will have a positive effect on the quality of the local environment,” says Barnes.

Furthermore, she says the legacy will effectively be a managed ‘landed estate’ with an eye on long-term quality, which means that some localities will have the potential to rival the more prime areas of west London.

This should attract newcomers who would otherwise not have considered the location previously, she says.

Smuts is of the opinion that the point to get across is that hosting the Olympics or Soccer World Cup doesn’t do much for house prices in itself - but the infrastructure upgrades do.

“House price increases near Gautrain stations in Gauteng South Africa in the wake of the Soccer World Cup is a good example of this,” he points out.

On home prices in East London in light of the Olympics Games, he says the housing market in the area, particularly around Stratford to the east, has under-performed in comparison to the rest of London.

Data from the Land Registry show house prices across London rose 5.1 percent year-on-year to April 2012, but in the east London borough of Newham, home to the Olympic Park, prices moved up just 2 percent.

This is in stark contrast to Kensington and Chelsea where prices have jumped 11.6 percent over the same period as wealthy foreign investors (including many South African buyers) flock to London looking for a safe haven for their wealth, he says.

Smuts says while capital growth has been lower than expected, rental prices have performed far better.

According to a rental index conducted by leasing company HomeLet, London rental prices in April were up 7.1 percent on the prior year, with those in east London (an area which includes and extends beyond Newham) outpacing the rest of the capital, rising 8.6 percent.

Wealthy South Africans are highly prudent with their investments and with the continued uncertainty around the prospects and timing of the global economic recovery, most favour the tangible and straightforward nature of residential property as an investment, according to Smuts.

London letting agents are reporting a surge in the number of advertisements placed on their websites and a record number of enquiries about properties available for short-term lets during the Olympic period, he says.

He notes that Gumtree.com, a UK-run site for classified ads, has seen 2 321 ads posted for Olympic rentals between January and May and almost 10 500 replies to such posts.

HomeAway.co.uk, the UK's number one holiday rentals site, said landlords taking bookings through their site have achieved rents between 70 and 200 percent higher than standard rates.

According to a BBC report, some landlords believe the opportunity to be so lucrative that they have asked existing tenants to leave to free up their properties for the few weeks during the games, he says.

“Still, much like the expected housing boom, I suspect the moneymaking potential of short-term rentals during the Olympics have been overstated by overzealous letting agents - especially because so many properties are coming on to the market,” he says.

Should landlords achieve higher-than-normal rates for their properties during the games, it will merely be a short-term phenomenon and hardly worth turning out existing long-term tenants, he says.

“Interestingly enough it would seem from the lettings data this short-term boost is likely to benefit other areas of London just as much as the Olympic boroughs.”

Rental companies say properties in central and west London have been equally popular as those local to the Olympic sites, with many visitors hunting out home stays closer to the city’s other major attractions, he says.

This week, Savills revealed in a report that a review of record prices achieved for residential real estate in the top 10 ‘world class’ cities reveals that London still holds gold four years after the record of £8 500 per square foot was set in 2008, making the city’s Kensington Palace Gardens the most expensive address.

The top three ‘world class’ cities closely grouped with records set at over £8 000 per square foot, with Hong Kong and New York just behind London with £8 400 and £8 300 respectively, according to the report.

View the record transaction here.

A property that transacted in 2008 in London’s Kensington Palace Gardens tops the list at £8 500 per square foot and Savills says what sets this home address apart from others is the rarity factor.

Its exclusivity, well established residential streets with extremely limited supply.

This week, Savills revealed in a report that a review of record prices achieved for residential real estate in the top 10 ‘world class’ cities reveals that London still holds gold four years after the record of £8 500 per square foot was set in 2008, making the city’s Kensington Palace Gardens the most expensive address.

According to the Knight Frank Prime Global Cities Index Q2 2012 report, the value of prime property in the world’s key cities rose by 1.4 percent and London ranked number five of the 27 global cities surveyed recording an annual price growth of 10.5 percent.

The same report saw two of Africa’s top home locations in the top 10 with Nairobi Kenya at number three (21.8 percent) and Cape Town in South Africa at number 10 (4.1 percent).

Read the article here.

Barnes says in the longer term, it is possible that to see increasing amounts of overseas wealth flowing into the area, not just from investors buying new build properties but also ‘displaced’ west Londoners taking the value of their property east and getting much more for their money.

In the end, much depends on the skills of those creating and managing the new places that are being created but it is difficult to see how such a good start could have been achieved without the Olympics, especially in the current economic climate, she says.

Barnes points out that Westfield has already had a positive impact on the area and the arrival of Crossrail in four years will certainly give a further boost.

Matt Leitch from the Savills Canary Wharf office explains that Newham, Hackney and Tower Hamlets all represent great value in the current market compared to their neighbours.

Tower Hamlets is the city’s cheapest boroughs and are significantly cheaper than, say, Canary Wharf – but have begun to see the benefits of neighbouring City and Islington prices, he points out.

Leitch says property developers are pushing east because they can’t push west due to high density existing development and this, together with huge investment in infrastructure will boost values over time.

“Individual and bulk property investors have been attracted by this potential and the outlook over the mid to long term is extremely positive.”

Connectivity is key to the redevelopment potential - the East London line extension triggered investor activity, and Stratford already has great connections to central London, the City and Canary Wharf, connected via the Jubilee and Central lines and DLR, plus the area will benefit from Crossrail by 2018.

The extended area will benefit from a great deal of residential and commercial investment over the next 20 to 25 years and this would be positive for both investment and owner occupiers, he says.

South Africans buying London homes

Tell us where many South Africans are buying property in London, prices they buy into and what is driving demand for London property from investors?

Asked where in London are South Africans buying homes, Smuts says central and south west London remains firm favourites with High Net Worth Individual (HNWI) South Africans, while the biggest employer of bankers in Europe, Canary Wharf is also fast growing in popularity.

“Most of our clients purchase in the price range of £350 000 to £500 000 for investment purposes and generate a gross yield of 5.5 and 6.5 percent.”

He says they are also seeing a lot of interest from HNW South Africans who are buying with a view to relocate or as a second property to use for when they visit their children or friends residing in London.

According to a rental index conducted by leasing company HomeLet, London rental prices in April were up 7.1 percent on the prior year, with those in east London (an area which includes and extends beyond Newham) outpacing the rest of the capital, rising 8.6 percent.

“For these buyers, trophy properties in the most desirable locations are at the top of their shopping lists and we have had a number of instructions recently for residential properties in excess of £1million.”

Wealthy South Africans are highly prudent with their investments and with the continued uncertainty around the prospects and timing of the global economic recovery, most favour the tangible and straightforward nature of residential property as an investment, he says.

Smuts says this risk aversion and the consequent trend of ‘flight to quality’ have been the main drivers for South African investors as they attempt to avoid economic and political uncertainty at home.

He points out that wealthy South Africans buyers do not seem to base their decision to invest offshore wholly on fear of the Rand’s fall in value or local political instability but rather by solid financial planning that includes diversification of asset classes and markets.

As a result South African buyers also take a very different view on the London market as a whole in that they do not see their property as a short-term investment.

In fact, some don't view it as an investment at all, but rather as a long-term asset that will stay in the family for generations to come, he says.

This is mainly due to the long-standing view that London property offers a safe haven, the enduring attractions of the city's excellent schools and the strong economic and social factors that makes it the investment destination of choice for the worlds wealthy.

London property prices have none the less vastly outperformed expectations.

Smuts notes that London was the last global market to go down in value and the first global market to recover during the global recession.

Prime London house prices are now 47.3 percent higher than the bottom credit crunch in March 2009 and that’s more than 12 percent above previous peak in March 2008.

Rents in Greater London average £1 177 per month –7.9 percent higher than average rents in April 2011, he says.

Smuts adds that while special events such as the Olympics Games and Soccer World Cup may come and go, investors will be well advised to ignore the hype and fanfare that accompany these events and instead, focus on investing fundamentally in income producing properties. –Denise Mhlanga

Buy a house – but how?

If you buy a house that has been lived in for a number of years it will cost you about 30% less than if you buy a brand new place that has never been occupied before according to figures released by First National Bank last week.

That got me thinking about the high cost of building and the more research I did – and the more thinking I did too – the angrier I became. Angry because building materials suppliers and property developers are ripping off the South African consumers.

A brand new ‘affordable’ apartment of 30 sqm costs around R300k in different parts of South Africa. It can be considerably more if you’re buying something in Clifton or Camps Bay but the average cost per square metre for an ‘affordable’ property in reasonable suburbs (including Mitchell’s Plain or Cosmo City) is around 10k per square metre.

Talk to the developers and they say the high costs of developing a site, combined with the high costs of labour and materials determine the price of the property when it is released onto the market.

All the developers are really quick to claim that the profit levels are minimal particularly when the money is tied up for so long before the first unit is sold. So if they’re not making good profits, why are they doing it?

The answer is actually that they are making huge profits and they’re just fudging their answers to dissuade me (and you) that they’re making lots and lots of bucks.
Much the same pattern applies to material suppliers. These organisations blame everybody else except themselves for the exorbitant prices of cement, bricks, plaster, tiles, fixtures and fittings and even glass.

The manufacturers and suppliers point fingers at the retailers claiming that they are the ones who are keeping prices high; then they point another set of fingers at the high costs of transporting their products from the factory to the site (or the retail outlet). They even blame the low productivity of workers for the high prices of products made for the building industry.

Do they blame themselves or do they reduce their margins? Not a chance. In fact year after year your large material suppliers provide handsome dividends for their shareholders. So, like developers, they too are making money – and lots of it.

The final culprit in this rather depressing cycle of profiteering is the banks themselves. You see it’s the banks that are prepared to fund the developers and then grant the bonds for each pokey little flat measuring five metres by six metres into which has been crammed a kitchen and bathroom too.

Recently, Human Settlements Minister Tokyo Sexwale urged developers, material suppliers, architects and engineers to come up with innovative ways to resolve the housing problems that face South Africa.

Well, here’s a thought Mr Minister: how’s about getting the developers, the materials suppliers and the banks to stop profiteering. How’s about getting them to stop driving prices higher and higher?

How can we do that?

Well let’s look at the existing position first of all. One of the attractions for buying a new property – particularly for first-time homebuyers – is that a new property is free from transfer duty and, in many cases, first-time buyers even qualify for 100% bonds.

Sometimes buyers are supported by a developer who offers a cash-back advance to them if they sign the deal. In fact, on a 140 sqm house costing R1,4-million I was offered a R50k cash-back (to spend on new furniture or other things I was told) if I agreed to buy the home.

If I was prepared to buy a slightly bigger place, costing R1,6-million then I’d get R100k cash-back advance. Sign the deal, get the money and spend it on a new plasma TV for the lounge, curtains for all the bedrooms, new furniture for all the rooms, buy some new appliances and so on. Even spend it on having a holiday after all the stresses of moving if I choose to.

And developers tell me that they’re not making handsome profits. Pull the other leg Mr and Mrs Property Developer.

Do you ever hear about a cash-back advance on the sale of an older property? Do you get any relief on transfer duties, bond costs, legal fees or any of the other charges that are added to a property transaction? You don’t even get a discount on stamp duty.

So what we know, clearly, is that the deposit, the transfer fees and the other charges make older properties unaffordable for first-time buyers unless they have a large amount of cash in their pockets to spend on the property.

So the stumbling block that’s preventing sales of second-hand homes is the additional costs that must be covered. That being the case, Mr Minister, why don’t you and your advisers come up with a way to reduce those costs or at least make them affordable for many millions of South Africans?
Of course the argument is that developers are paying Value Added Tax on the materials they buy and because of the VAT the property doesn’t attract transfer duties.

So what about a VAT amount that gets included in the sales price of older properties (and therefore is included in the price) instead of transfer duties.

That way people could get a bond (including VAT) for the second-hand property they want to own and not pay any transfer costs at all. Sure, they’d have to cover the legal fees to feed the ever-hungry attorneys that do all the paperwork but those costs are relatively small compared with the many other charges.

Perhaps there are other ways that you, Mr Minister, can come up with to resolve the sales of property in the second-hand market and I think that there are many possible solutions too. But the reality is that the problem of transfer fees, deposits and other costs must be addressed.

More importantly than that, though, is that if you re-energise the second-hand property market the bottom will fall out of the market for new properties. Particularly so if banks come to this party and provide the bond finance required to buy older properties.

If that happened, the price of new homes would plummet.

And, if developers stop developing new properties, the materials suppliers would find that their sales levels fell sharply and they’d be forced to do something about their prices too. Like a pack of cards, the materials prices would come tumbling down too.

And so the entire cycle for reducing costs would start to work: Materials prices fall; new property prices drop correspondingly and stay there until new buyers come into the market and start buying properties that are actually affordable.

But to claim, as developers do right now, that a pokey little apartment costing R10k per square metre in a distant suburb far is ‘affordable’ is nonsense.

If you ask me, affordable is about half of that?

*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.

1000s of repossessed houses up for sale

Anyone wanting to buy a house right now should start by checking out the repossessed properties that all the banks have listed on their websites (or websites hosted by some other company on their behalf).

This week I was wondering what prices were like in the repossessions and auction markets because, frankly, I’m flabbergasted at just how much money people are currently spending on properties.

I regularly see sales of luxury homes costing R38-million in Constantia, R54-million in Sandhurst or a staggering average price of R11,8-million in Clifton. That’s not for some mighty mansion, but for one of those pokey little apartments with no parking that scorches under the blaze of the setting sun.

I set about researching some of the auction and repossession websites and found some interesting information lurking in the pages: first of all, if you thought that houses in the middle- and low-income groups were the only ones being auctioned or repossessed, think again.

There are screeds and screeds of properties with bonds of R3-million and more listed by the banks. There are even properties of close to R10-million listed alongside the rather quaint commentary that the estimated bond repayment is R87,973,38.

To afford that sort of bond, the monthly household income would have to be at least three times that, at about R265,000. Some people in South Africa are obviously earning great sums of money.

None of the banks’ websites give any clear indication of whether or not the offer you might make will be accepted but there are guidelines: for instance, on one property I saw the asking price was R2,5-million but the best offer received so far was R1,8-million or R700k less.

It hasn’t yet been accepted (so I guess the bank is waiting for someone to offer a bit more) but if no-one does offer more for the property then it will probably be accepted and somebody will have just saved himself or herself a fistful of money.
I tried to establish exactly how many properties in possession are listed by the banks but they clearly are not too keen to publish this information so you have to laboriously count the properties that are listed. And, predictably, some of the information on the website itself is bound to be out of date too.

My calculations reveal that there are at least 5,000 properties in possession among all the banks but that is probably a hopelessly low estimate because the banks do not provide any kind of full disclosure when it comes to these figures.
What it does tell me though are some other interesting things:

- At least 5,000 families have lost their homes and are probably living in rented accommodation or have moved back to the family home;

- The banks will have to protect these properties from being vandalised at an enormous cost to their shareholders. Any property that stands empty for more than a couple of days is bound to have its fixtures and fittings stripped out by greedy thieves;

- There are at least 5,000 bargain properties to be had in the current market in places that many people would like to live;

- The prices that are reflected on the websites are a guideline and nothing more.

Of course the range of properties on offer is enormous and, I suppose, in the main centres of Johannesburg and Pretoria, Cape Town and Mandela Bay, Durban and Bloemfontein the number of properties in possession is predictably higher than in the more remote, smaller cities such as Kimberley.
Absa, which has an unusually unfriendly website of repossessed properties provides simple guidelines on the asking price only and it lists the least number of properties in possession despite claiming to be the largest mortgage lender in the country.

I find this strange but I must admit that I find a lot of things about Absa strange and I’m not sure that the information on its website reflects the true picture. That’s academic, however, because the real point of the exercise was to establish whether there are bargains to be had from the banks directly.

And it certainly seems that there are.

Of course, some people might like to actually attend the auction sales when a distressed property is sold in a particular suburb. But for those people like me who have to work for a living, it makes sense to browse through the properties that are available and then make an offer directly to the bank (or in some cases, to the estate agent working for the bank).

Of course this was another anomaly for me: why, if the bank is advertising properties in possession would it want to pay an estate agent to market the property for them. That’s me being naïve because, I suppose, the banks are putting the house on show (via the agent) every weekend to prevent vandalism and, hopefully, to get an offer that vaguely resembles the price being asked.

And, worse than that, they’ve probably negotiated a specially low commission rate with the agent too because that’s the way the banks work.

So if I were about to buy a house I would start off with the properties in possession and then I would make a ridiculously low offer for the property. The worst that can happen is the offer is rejected and you have to revise the price.
More importantly, where there is an agent listed for the property, I’d insist inspecting the property as soon as possible. The reality is that these properties do get stripped, vandalised and damaged. And the garden, the swimming pool and those pretty ponds soon become an eyesore and you will have to pay for all the necessary repairs yourself – or insert special conditions in the purchase agreement stipulating what remedial work must be done before occupation.

The other thing to ensure is that you will be absolved of all liability when it comes to electricity, rates and taxes. While these charges are obviously not for your account, more and more councils are refusing to reconnect services or provide clearance certificates if there is an outstanding amount on the previous account.
This means, of course, that the bank would have to pay these charges and not you. But what’s the point of moving into a new house and then discovering that you can’t get the electricity supply connected until the outstanding account of R69,781 has been paid. So make sure that these things are tied up and sorted out when you sign the offer to purchase.

If you can’t find a house that you like through the properties in possession of banks then scour the neighbourhood for auction sale signs and watch the Thursday and Friday editions of the newspapers as these usually carry details of auctions that are pending or properties about to be repossessed too.

There are thousands of bargains to be had in the auction and repossessed property market and while it may seem rather mercenary, the reality is that the banks and the auction houses want to dispose of the property as quickly as possible.

So keep your eyes open wide.

*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.

Strand Beach Road sales pick up

The Strand Beach Road property market has showed positive signs contrary to the general SA sectional title market during the 2008/9 period with growing sales figures since the latter part of 2009 – comparative to the depressed sales of the 2008/9 period

Benhard Wiese, principal associate of Cape Coastal Homes, says these better-than-national sectional title sales figures are attributable to the area offering much better value per square metre than the similar property offerings on e।g. the Cape Atlantic seaboard.

“The buyers interested in Strand Beach Road are also buying with a long term view – mostly viewing the property as their second home to be converted into their retirement home.”

He says only 7% of the registered sales of apartments older than three years on Beach Road have during 2010 been for less than present comparative property values per sqm – a sign of a solid market that escaped the storms of 2008/9 relatively unscathed.

“The availability and affordability of credit coupled with the surplus of available new development apartments on Beach Road since 2007 had suppressed capital growth during 2008 to 2010. According to CMA Info, there had been 46 sales in Strand Beach Road during 2008 - that is about four sales per month.”

The volume of sales, however (excluding inheritance), during 2009 grew to 86 transactions of which 25 were new developments and 61 were older complexes.

Excluding all new developments registered in the Deeds Office, there was still a growth in sales volume of about 37% from 2008 to 2009 on Strand Beach Road - totally contrary to statistics from SAPTG which indicate that nationally sectional title (apartment) property priced between R300k to R5m reported an overall decline of 39% in transfers between 2008 and 2009.

The average price per sqm for the 61 registered sales in 2009 for all apartments older than four years on Strand Beach Road (i.e. excluding the new developments which occurred at a higher average price per sq/m) was about R12,900/sqm whilst the new developments registered average prices in 2009 was R17,725/sqm.

The first semester of 2010 has seen a continuation of the growing sales trend on Strand Beach Road with 41 sales being registered according to SAPTG in the Deeds Office of which 14 were new developments built since 2008 (e.g. Hibernian Towers and Topaz).

The average price per sqm for the registered sales in the first semester of 2010 for all apartments older than four years on Strand Beach Road (i.e. excluding the new developments) was about R13,462/sqm.

The new developments average registered prices in 2010 have been ranging between R12,686/sqm for Ocean View to R23,225/sqm for Topaz.He says total registered sales for the first semester of 2010 for the 4 new developments on Strand Beach Road had been R30,524,151 at an average of R15,439 for the 1977sqm sold. That is about 13% lower than the average registered sales prices achieved for new developments during 2009 of R17,725 per sqm.

Interestingly enough, there has only been about a 13% difference in average prices obtained (registered) between older apartments and new developments (less than four years old) during 2010. The present price structure of Beach Road properties can be roughly categorised in different groups according to "age, finishes and size".

The smaller the apartment, the higher the price achieved per sqm. The quality of sea view also has a big effect on the property’s value.Prices obtained in 2008 varied between R7,600/sqm (Strandsig) to R24,700/sqm (Cape Sands). The apartment prices in 2009 varied between R8,500 per sqm (Welgelegen and Jacomahof) to R23,900 per sqm (Hibernian Towers). Beach front apartments were selling in 2003 from about R6k/sqm to about R9k per sqm.

Beach Road property in general has not been subjected to the same forces which have been experienced in e.g. the buy-to let investor property sectors where capital growth has seen fairly substantial drops. The growing foreclosure or bank repossessions trend created during 2008/9 and during the first semester of 2010 effected a strong downward pressure on prices obtained in the buy-to-let property market.

Some auctions at the entry level investor sectional title market (priced at up to R450k) have towards the end of 2009 seen prices drop by as much as 50% of what was the perceived value of the property in 2007. Auctions on Beach Road have, however, been a very small part of the transactional horizon and were therefore not a distinct negative capital growth factor at all.

Only a few distressed sales in some of the new developments took place – without any real effect on the rest of the older blocks, where most of the owners opted to keep their apartments from the market – especially if they did not need to sell.

From the 27 sales which had been registered in the Deeds Office during the first months of 2010, only two transactions took place at prices which seem to be much lower than other comparative properties per sqm – a Romilly apartment at R8,426/sqm and an apartment in Strandsig at R7,432/sqm.Only 7% of all transactions on Beach Road during 2010 amongst the older-than-4-year-old apartment blocks had been registered for much lower than comparative market value.

The last two years has been a sobering period for all property owners in the country – including Beach Road Strand. The unrealistic capital growth expectations have been tempered to pre-2003 growth levels.

Although apartment prices got far “out of touch” with incomes levels during the boom, it is to be expected that inflation will in the next few years close this gap considerably.

“Strand Beach Road has during the last few decades always operated on an eight to ten year tide pattern – with surges of new developments coming every eight to ten years. Buyers who are waiting for Beach Road prices to drop are doing it at their own peril,” he concluded.

Global housing on the mend - December 2009

Investors across the globe are starting to return to residential property markets, following what has arguably been one of the longest and strongest real estate slumps the world has ever seen.
The Knight Frank global house price index for third quarter 2009 released earlier this week shows that house prices are now rising in almost 70% of the locations tracked by the British property group, compared to less than 50% in second quarter 2009. Knight Frank compares house price movements in 42 countries.

Liam Bailey, head of residential research at Knight Frank, says although house prices in almost 60% of the countries included in the index are still lower than they were a year ago, most markets have now turned the corner.

Singapore reported the biggest quarterly jump in prices with growth of 15,2% in third quarter. That was followed by Hong Kong (6,3%), Canada (4,9%), Australia (4,2%) and New Zealand (4,2%). South Africa ranks as the sixth fastest growing housing market in Knight Frank's index, with prices up 3,8% in the three months to September 2009 (quarter-on-quarter).
The UK and US, two of the countries hardest hit by the credit crunch and global recession, are also back in positive growth territory with quarterly price increases of 3,7% and 3,2% respectively.

On an annual basis, Israel is now the world' fastest growing housing market with prices rising 13,7% in the year to September 2009. That was followed by Austria (9,7%), Malta (9,7%) and Switzerland (7%). South Africa ranks 15th in the annual growth stakes with prices up 1,3% over the 12-month period.

Dubai is the biggest loser, with prices sliding a massive -47% in third quarter 2009 year-on-year (y/y). There are also a few European countries where prices are still falling on the back of what appears to an oversupply of stock. These include Spain, Denmark and Ireland.

Bailey says Dubai's recent debt woes have no doubt dented investor confidence in that country. The problems now seen in Dubai's housing market underscore the fact that the global housing recovery will not necessarily be smooth sailing, says Bailey.

However, he believes that any further house price falls are likely to be corrections rather than the start of another round of drastic reductions.

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