| 6 March 2009 |
 
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Key highlights:
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The impact of the credit crunch has now affected virtually every global housing market |
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Over 80% of the locations in the global house index recorded negative price growth in the final three months of 2008 compared with 27% in Q4 2007 |
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Although house prices did increase by over 10% in seven countries (all within EMEA) during 2008, values have now started to fall in six of these |
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Dubai was the strongest performer in 2008, rising by almost 60%, but much of this gain may well be wiped out in 2009 |
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Latvia saw the biggest annual and quarterly falls, with prices plummeting 16% in the final quarter of 2008 and 33.5% overall |
The latest government and central bank house price data for the final quarter of 2008 has confirmed that conditions in residential markets across the globe continue to worsen. To make matters worse, we believe that some official figures do not reflect the true extent of the decline in certain countries.
It is now clear that no market will escape unscathed from the global financial crisis, although the scale of the impact will vary according to the structure not just of the housing markets themselves but also the underlying economies.
What has become increasingly apparent is that buyer confidence has been eroded due to a combination of falling house prices and slowing economies which, for a growing number of households around the world, translates into fears about job loss and, in some cases, negative equity.
Unsurprisingly, not all markets are at the same point in the cycle of the housing market downturn. This means that on an annualised basis, a number of countries tracked in our index are still reporting price growth. Prices increased in 42% of the countries with 16% rising by over 10%, but this compares with increases in almost 80% of locations during 2007, 44% of which saw double-digit growth.
However, the wave of depression is hitting all markets - in the final three months of 2008, the index showed that 81% of the countries tracked exhibited negative growth compared with just 27% in the corresponding quarter in 2007.
Even the countries that saw the biggest increase in 2008 are now suffering. Of the seven countries (all within EMEA) that recorded overall double-digit growth last year, all but one (the Czech Republic), reported a fall in prices in the final quarter of the year.
Nicholas Barnes, head of international residential research, Knight Frank, commented: “Predicting how much further markets will fall during 2009 is virtually impossible. While every market is being buffeted by the contagion effect of the global economic downturn, the scale and the duration of the impact upon individual countries will vary. It is not safe to conclude that just because one country entered the downturn ahead of another, that it will automatically recover more quickly.
“The current downturn is unlike any other we have ever witnessed in both scale and causes. Experience of previous downturns, while potentially helpful, will not necessarily provide us with an accurate picture of when and how markets will emerge from the crisis – nor will pre-conceived ideas or hubris.
“This year is likely to be a more difficult than 2008, however there is a “consensus of hope” that the trough of the current cycle will be reached in 2009, although a bounce-back is not anticipated and the current fragility of markets could be exposed by further bad news from the financial sector or indeed the underlying economies. At some point, however, buyers will decide that price falls in many markets represent once-in-a-generation opportunities that are too good to pass up.”
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