US rate rise 'poses problems for house prices' in emerging markets

House prices across the world increased by 2.7 per cent in the year to September, though there were wide variations between nations, especially in Europe, according to the latest Knight Frank Global House Price Index.

Seattle skyline
The survey showed that five states – Turkey, Hong Kong, Sweden, New Zealand and Luxembourg – had recorded double-digit growth over the year while the dramatic decline in property prices in China had slowed from minus 5.7 per cent in the previous 12 months to minus two per cent this year.Looking at the year ahead, the report warns, "With a US rate rise now imminent, there will be significant repercussions for the world's already-fragile emerging markets."Kate Everett-Allen, a partner at Knight Frank's international residential research, said that, of the 55 housing markets tracked, 45 had recorded positive annual price growth, up from 41 a year earlier."Turkey leads the rankings with prices up 18.9 per cent year-on-year," she said. "Strong levels of foreign investment, an expanding population and a slowdown in construction explain the upward pressure on prices."Australasia and Scandinavia also stand out as key centres of growth. New Zealand and Australia recorded annual growth of 12.6 per cent and 9.8 per cent respectively. House prices in each country now stand 43 per cent and 48 per cent respectively above their financial crisis lows."Sweden was Europe's strongest-performing housing market in the year to September. Prices rose 11.1 per cent year-on-year, in part due to an historic undersupply of housing. Property prices are rising fast in Norway and Denmark, too, with each country recording close to a six per cent increase year-on-year."The survey reflected a mixed picture across Europe with countries such as Ireland, Hungary and Estonia, which recorded precipitous falls during the economic crisis, showing healthy growth this year but still remaining below their 2008 levels.Elsewhere in Europe, the UK recorded a 3.7 per cent rise while provisional figures from France showed a 2.9 per cent decline, similar to the fall in Italy. Prices in Germany, on the other hand, rose 4.7 per cent.Ms Everett-Allen added, "Price growth in Canada (5.6 per cent) continues to eclipse that of the US (4.9 per cent). Prices in Canada are now rising at their fastest annual rate since 2012."The focus now is on when, and how quickly, the Federal Reserve raises the US interest rate. If analysts' estimate of December is right, it will be the first time the US has embarked on a policy of monetary tightening since 2004, and it will have repercussions not just for the US housing market, but for those currencies pegged to the US dollar as well as emerging markets globally."On China, Ms Everett-Allen said that, although the economic downturn this year had shaken global confidence, "its housing market looks to be following an upward curve."The biggest property price falls in the list were recorded in strife-torn Ukraine, where the index recorded a 14.8 per cent fall over the year.For more Re:locate news and features on residential property, click here and for more on the global cost of living, click here