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Jul
09
Europe’s Real Estate Resurgence Continues

As Europe continues to be the peak of the global residential price growth, China, the world’s prime market for the past couple of years, takes the lead for its runaway home prices. According to the Knight Frank Global Residential Cities Index, in the first quarter of 2018 alone, 15 out of the 24 global cities that posted a double-digit price increase for residential homes were in Europe. Further solidifying Europe’s position as a leading home market. In the front of the group was Berlin, with an annual growth rate of 14.9%, next Rotterdam, Netherlands, coming in second at 14.8% and Budapest, Hungary, coming third at 14.4%.

The recovery in European cities is largely attributable to the region’s improved economic outlook and the supply/demand imbalance

Ms.Everett-Allen also noted that last year, the EU-28 recorded a 2.5% GDP growth year-over-year in comparison to -0.4% from given years previous, citing data from Eurostat. And while economic output has increased, and new jobs are created every day, along with improved consumer sentiment, the housing market has failed to keep the pace. “Despite government incentives in some markets, target completion rates are being missed,” Ms. Everett-Allen said. “This imbalance between demand and supply is putting pressure on prices.” Conversely, aside from Hong Kong, no Chinese cities have been represented in the top 10 or top 20 lists, this marks a change from the past couple years where they had previously dominated. Seeing the risks of a potential housing bubble, the Chinese government has been increasing efforts to tighten mortgage financing and to suppress speculative investment in the real estate market. In the first three months of 2018, the housing markets of both Australia and New Zealand have noticeably slowed. Wellington dropped to 38th place with an annual price growth of 7.2%, all the way down from 11th place a year ago when home prices grew 20.6% year-over-year.

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Similarly, Sydney registered a negative 0.5% growth rate in the first quarter, compared to a 14.4% increase at the same time last year.

Residential Prices in Selected Global Cities

City/Country

2018 Rank

Y-O-Y change

2017 Rank

Y-O-Y change

Berlin, DE

5

14.9%

NA

NA

Hong Kong, CN

3

15.6%

17

18.6%

London, UK

124

-0.6%

107

3.0%

Madrid, ES

23

10.3%

85

4.9%

Seattle, US

10

12.9%

29

12.2%

Shanghai, CN

120

-0.3%

13

19.7%

Surat, IN

1

22.3%

NA

NA

Sydney, AU

123

-0.5%

23

14.4%

Vancouver, CA

4

15.4%

30

12.2%

Wellington, AZ

38

7.2%

11

20.6%

150-city Index

4%

6.4%

Source: Knight Frank

Other key findings include:

• Surat, a west coast city in India, topped the index with a 22.3% price increase due to a low base in the first quarter of 2017, when the country demonetized its high-value currency
• Seattle continued to be the fastest-growing U.S. housing market, with a 12.9% price appreciation year-over-year.
• Among the 10 Canadian cities Knight Frank tracks, only Vancouver logged a two-figure growth rate (15.4%).
• Southern Europe is increasingly polarized. While Italian cities were among the slowest-growing cities, Spanish and Portuguese cities registered strong growth.

Government Measures Slowing Housing Markets

Knight Frank’s 150-city index increased by only 4% in the first quarter of 2018, making this the slowest growth rate since the third quarter of 2015. In comparison, the index increased by 6.4% in the first quarter of 2017. Additionally, in 2017 12 cities around the world posted price growth of over 20% in the first quarter alone, conversely, this year saw only one city reach that level, India’s Surat, but for unknown circumstances. To conclude, the index’s weaker performance is in part due to macro policies put in place by some of the bigger countries, including interest rate increases, and those “along with escalating affordability constraints account for the index’s weaker performance,” Ms. Everett-Allen said.

Sources: https://www.mansionglobal.com/articles/europe-s-real-estate-resurgence-continues-101965


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