Global house price growth accelerates
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Global house price growth is accelerating as central banks step up campaigns to ease monetary policy.
House prices in the 56 markets tracked by Knight Frank's Global House Price Index rose 3.3% in the year through June. That's below the pre-Covid trend of 4.6%, but growth has ticked up since the low reached in Q2 2023. Values climbed 1.9% in the last three months, well above the pre-Covid average of 1.1%. About three quarters of markets saw house prices climb in the past three months, the highest reading in two years.
Global inflation looks increasingly benign and several central banks have indicated they may increase the pace of rate cuts amid weak economic growth. That includes the Bank of England (more on that below), the European Central Bank, and the central banks of Canada and Sweden.
Safe credit
Turkey leads our index with 46.4% nominal annual price growth. However, with the economy undergoing a second round of very high inflation, prices are dropping by around 14% annually in real, inflation-adjusted terms. Poland sits in second place with 18% price growth. Strong population growth and the recent “Safe Credit” mortgage subsidy program have helped push prices higher against an ongoing structural undersupply of homes.
The US market continues to deliver strong growth numbers, up 5.5% on an annual basis. Some of this growth is due to falling mortgage rates, but most of it results from strong household formation and limited housing supply. This issue is worsened by the very low long-term rates that existing owners benefit from and the lack of market liquidity this has created across the US. Rates need to fall much further before sales volumes begin to normalise.
Hong Kong is at the bottom of our table with prices falling by 12.7%, although prices were flat over the last quarter, pointing to the potentially successful impact of recent easing of purchase restrictions and stamp duties. Mainland China is struggling to achieve growth,
with prices slipping by 5.2% over the past year. This downturn comes despite various support measures from the government.
A bit more aggressive
For weeks, policymakers at the Bank of England have maintained that they are happy to ease monetary policy at a slower rate than peers amid signs of persistent domestic inflation. The outlook pushed sterling to a two-year high against the euro.
Governor Andrew Bailey issued a meaningful shift to that narrative in an interview with the Guardian yesterday. The BoE can become "a bit more aggressive" and "a bit more activist" in its approach to cutting rates, provided the inflation data continues to deliver good news.
These comments will have been carefully planned and markets are now in the process of repricing to account for the new outlook. Sterling posted its biggest one-day slide against the euro since late 2022 yesterday. Royal Bank of Canada said it reckons the BoE will cut at every meeting until May next year. That would bring the base rate to 3.75%.
Retail parks
British Land on Thursday announced it had raised £300 million to help fund a deal to buy seven retail parks from Brookfield for £441 million. The company has now spent £771m on retail parks since April.
In a trading update, the company said it favours retail parks because they are affordable and easily accessible. The parks now comprise almost a third of the company's portfolio, up from 22% just 18 months ago.
Chief Executive Simon Carter gave an interesting interview to the FT, in which he suggested listed firms were gaining an upper hand when it comes to raising and deploying capital: Higher debt costs have “levelled the playing field between public markets and private capital, and probably even tilted [it] in favour of the public market”, he said.
In other news...
UK services firms slow their price increases, PMI shows (Reuters), Oil surges after Joe Biden’s comments on Israeli retaliation (FT), building new towns needs radical approach to planning and funding says task force chair (FT), and finally, Blackstone says property rebound will not save over-indebted office owners (FT).