The pandemic has pushed demand for property sky-high almost worldwide. As a result, global house prices experienced a double-digit increase in the first quarter of this year, according to the latest Index from Knight Frank. In nominal growth terms, 45% of countries registered growth in excess of 10% in the 12 months between April 2021 and March 2022.
Difference between real and nominal growth
The Index found that prices in the 56 countries included rose by 10.2% in nominal terms. However, when it comes to real growth, ie, the increase accounting for inflation, global house prices saw much more moderate rises. Knight Frank calculates the figure to be around 3.3%.
The difference leads analysts to believe that a house price slowdown is on the horizon, and statistics would appear to back this prediction. Real growth in house prices has gone down over the last two quarters.
Movers and shakers in global house prices
Just 2 of the 56 markets that make up the Index saw house prices drop during Q1 this year. In both Morocco and Malaysia, values fell by. However, they rose in all the other countries.
In nominal growth terms, Turkey outshines everywhere else. Property values skyrocketed by 110% in the year to March 2022. The giant uptick is almost four times higher than the Czech Republic, whose 25.9% price rise placed it in second place in the world.
European countries dominated the top ten, with Slovakia and Estonia also posting an increase of over 20% in the year. The Netherlands came close behind with a 19.5% rise.
Due to rampant inflation in Turkey (69.9%), the real increase in house prices is far below 110%. Knight Frank estimates it to be in the region of 30.3%. However, although the actual figure is around two-thirds below the nominal, Turkey still experienced the most significant rise in property.
The Czech Republic remained in second place after taking inflation into account. Its property market saw an 18.1% in value. Jersey took the third position (+16.2%), followed by Slovakia, where house prices rose by 15.4%.
However, North America was the world leader in global property price terms and discounting Turkey. Property values rose by an average of 18.6% in the region. Those in Europe registered 11.6% growth, while prices in Asia experienced a much more moderate increase of 6.4%.
What’s next for global property prices?
In the wake of the pandemic and the war in Ukraine, pressure on the supply chain has led to rising inflation worldwide. Knight Frank points out that high inflation rates are boosting debt levels as well as taxing disposable household incomes.
However, their analysts expect “a soft landing” in most cases. They base this prediction on “robust household balance sheets” and homeowners’ desire to spend more money on their homes.
(Source: Knight Frank)