Global mainstream property prices are rising at their slowest pace in three years, with an annual growth of just 0.3% through the first quarter, according to the latest Knight Frank Global House Price Index. However, the index's average, which is weighted by GDP to give bigger countries such as the U.S. and Russia greater sway, disguises an increasing disparity in housing markets between different world regions. Some of the largest economies are dragging down growth, with Japan, France and, crucially, China, experiencing property price slowdowns. China’s home values dropped 6.4% between the first quarter of 2014 and the first quarter of 2015. Only Cyprus, with a decline of 8.2% and Ukraine, with a 15.5% fall, fared worse. Ukraine’s market makes Russia and the Commonwealth of Independent States the poorest performing world region, despite mainstream house prices in Russia rising by 5.3% since March 2014.
Hong Kong was the best-performing market, with prices ending the year nearly 19% higher. Kate Everett-Allen, the report’s author, believes this is due to a lack of supply combined with the popularity of smaller apartments as a result of affordability constraints. Though overall growth appears to be slowing, around 75% of countries tracked by the index recorded flat or positive annual price inflation in the first quarter. Three years earlier this figure was closer to 47%. The index is compiled on a quarterly basis using official government house price statistics or central bank data. Things are looking up in Europe though it remains a region divided. "European countries which claimed almost exclusive rights to the bottom half of the rankings for several years are now more evenly spread with seven of the top 10 best-performing countries now located in Europe,” said Everett-Allen. The list includes Turkey, Ireland, Luxembourg and Estonia, which all registered double-digit rises. Prices in Spain are now increasing at their fastest rate in six years, in part because of improved mortgage lending. But Greece, France and Italy sit among the ten weakest markets. "The two bellwethers of global housing economics, China and the U.S., are pursuing divergent courses but for how long?," says Everett-Allen. "While prices continue to soften in China the volume of sales rose 7% year-on-year in April on the back of looser monetary policy." The U.S., on the other hand, recorded 4.1% price growth in the year to March. Correction: The chart with this article has been updated. An earlier version incorrectly showed unweighted index results by region.
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