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tentative recovery, according to a newly released report from
London-based global property consultancy Knight Frank. The
quarterly Knight Frank Global House Price Index shows property values
increasing in almost half of 32 countries surveyed during the second
quarter of this year. 'Significantly, quarterly price falls
accelerated in only 22 per cent of the locations and did not exceed
10 per cent in any country,' says Liam Bailey, head of residential
research for Knight Frank. 'This compares with double-digit falls in
a number of locations during the first quarter.' Some of the
strongest signs of recovery are coming from the Nordic countries,
with prices up over the previous quarter by 5.3 per cent in Norway,
3.9 per cent in Finland, and 3.6 per cent in Sweden. But countries as
diverse as Australia, Israel, and the Netherlands also are posting
solid gains. In some places, demand is being spurred by
historically low borrowing costs and home buyer tax incentives.
Sweden's central bank, for example, has slashed the prime interest
rate from 3.75 per cent a year ago to only 0.25 per cent today, so
banks there are now offering home loans at interest rates as low as
1.5 per cent. Interest rate reductions by the Bank of England,
coupled with a relatively tight supply of housing in Britain, has
reignited the market there as well, sending prices up 1.1 per cent in
the second quarter after five consecutive quarters of price drops.
The market is even starting to rebound in the US, where the subprime
mortgage crisis originally began. US home prices rose 1.3 per cent
in the second quarter, following declines of 7 per cent in each of
the previous two quarters. Even hard-hit regions such as California
are starting to recover. But worries still linger. Credit remains
constrained as the global economy struggles to recover, and many
countries still have an excess supply of unsold property, putting
downward pressure on prices. Despite the positive signs in the
second quarter, prices in most countries remain lower than a year
ago, and Knight Frank says the market is still fragile. What's
more, super-low interest rates won't last forever. 'One could even
say that house prices are now artificially boosted by low mortgage
rates,' says Magnus Lange, a partner in the Stockholm office of real
estate brokerage Cushman & Wakefield. 'I'm expecting to see (
Swedish) house prices fall by 15 per cent in the year ahead, once
banks raise their interest rates. ' And some countries are still
basket cases. Bulgaria, where the real estate market once boomed on
sales of vacation homes to wealthy Russians and Europeans, saw
second-quarter prices fall 9.7 per cent, on top of a 12.4 per cent
decline during the first quarter. For a look at how all 32
countries surveyed by Knight Frank fared in the second quarter, check
out our slide show.
