According to Knight Frank’s latest Global House Price Index, the UK’s position in global rankings for house price growth has dropped significantly from 26th to 47th place over the past year. Property prices in the UK have experienced a year-on-year decline of 3.1% and a decrease of 5.6% in the last six months. The UK now ranks only four places higher than Ukraine, which sits in 52nd place after a 7.8% drop in property prices due to the ongoing war.
Knight Frank’s rankings reveal that property prices in 56 countries worldwide have seen the slowest pace of growth since 2015 in the past year. Global house price inflation has slowed to 3.6% in the 12 months leading up to the first quarter of 2023, down from a growth rate of 5.7%. However, while there was a contraction of 0.6% in global house prices in the final three months of 2022, there was a 1.5% increase in the first three months of 2023.
In terms of specific countries, South Korea, New Zealand, Hong Kong, and Sweden have experienced significant declines in property prices, with drops of 15.7%, 13%, 10.3%, and 8.8% respectively. New Zealand, in particular, has seen one of the largest falls in prices globally. Although prices are expected to continue falling, Knight Frank predicts that an increase in both demand and prices will occur earlier than in other developed markets due to the speed and depth of the correction.
Interestingly, Australia and Denmark have fared worse than the UK in the rankings, with both countries experiencing over a 5% annual decline in house prices. On the other hand, Turkey leads the rankings with property price growth of 132.8% in the year leading up to March 2023, primarily due to rampant inflation. The US, despite ranking 39th, saw a 0.7% increase in property prices over the past year but a 1.1% decrease over a six-month period. Spain, a popular destination for British buyers, saw a 3% rise in house prices, placing it at 29th in the rankings.
Countries in Eastern and Southeastern Europe, such as North Macedonia, Croatia, and Hungary, dominated the top of the rankings with strong annual growth rates of over 15%. Singapore performed the best in the Asia-Pacific region, achieving 11.3% annual growth. According to Knight Frank, changes in tax policy in Singapore aimed at cooling rising prices have mainly targeted overseas buyers, but domestic demand has been sufficient to drive prices to new highs. Additionally, the Urban Redevelopment Authority is releasing new development sites to increase housing supply.
Looking ahead, Knight Frank highlights the risks facing global property markets, with high inflation being the largest concern. While headline rates have fallen in most locations, core inflation remains stubbornly high in the UK, the US, and Europe. The first cuts in policy rates may be delayed to the second half of 2024, leading to lower transactions and market liquidity for at least a year.
Liam Bailey, global head of research at Knight Frank, emphasized that although there has been a significant slowdown in annual price growth, there has been an improvement in quarterly growth. He suggested that tight supply, limited new housing construction, and strong household formation have acted as factors supporting prices in many markets.
In light of falling property prices, buyers can take advantage of the situation as long as they can afford higher mortgage rates. Property buying agent Alex Decmar recommends that buyers make the most of the small window to purchase at below-market levels seen in the previous year. He believes that the market will bounce back within the next 18-24 months, and those who buy now will benefit in the long run, despite short-term discomfort.
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