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figures showing the downward spiral may be halting are the most meaningful
signs yet of a possible economic recovery. As battered banks and stocks
rally again, news that US house prices are finally rising after nearly three
years of traumatic decline offers the greatest hope to hard-pressed
homeowners from California to Krakow. The sub-prime home loan crisis in
America was the pressure-point that exposed underlying global financial
chaos — and many economists say property prices there are the linchpin for
confidence in broader economic recovery. US home sales have been rising
and the latest Standard & Poor's/Case Shiller index of home prices in 20
major US cities showed a 0.5 per cent increase between April and May — the
first monthly rise since 2006. 'This is the first time we have seen
broad increases in home prices in 34 months. This could be an indication
that home price declines are finally stabilising,' said Standard & Poor's
analyst David Blitzer. Data from the National Association of Realtors
also showed the median price of existing US home sales was 181,600 dollars
(127,200 euros) in June — 15 per cent lower than a year ago, but up from
174,700 in May. Celia Chen, an analyst at credit rating agency Moody's,
said there were 'tantalising signs that the descent in house prices is at
least moderating,' but warned that house prices will not reach their 2006
highs until 2020. Joel Naroff at Naroff Economic Advisors disagreed with
that downbeat view, saying the increase 'could start increasing much more
rapidly than projected.' Analysts remain sceptical on the longer-term
outlook for property prices as stable economic growth remains vulnerable to
rising unemployment and government strategies for a clean exit from
recession after unprecedented fiscal stimulus. But that is doing little
to dampen cautious optimism on property markets. Official data in China
is showing house prices in 70 cities up 0.8 per cent in June from May,
rising for the fourth straight month, while real estate investment
nationwide rose 9.9 per cent in the first half of the year. In Britain,
house prices rose by 1.1 per cent in July to just under 160,000 pounds
(187,600 euros, 267,700 dollars) from June, but were down 12.1 per cent over
12 months, a survey from home-loans provider Halifax showed this week. In
neighbouring Ireland, however, prices have fallen by up to 40 per cent from
their peak in 2006 and are still going down — with the government now
working to provide 90 billion euros in guarantees to the loan market.
Likewise, Spain's second-biggest bank BBVA has forecast that house prices
after a decade- long, tourism-fuelled property boom will still fall by
nearly 30 per cent between 2008 and 2011 before they start to recover. In
the Gulf emirate of Dubai, house prices have almost halved over the past
year. The sector there is struggling with a shortage of liquidity and job
security for expatriates who represent over 80 per cent of the population.
The decline in Dubai has had wider implications, with US bank Morgan
Stanley saying world steel production will remain below 75 per cent capacity
as it awaits a revival in the construction sector in the Middle East.
