House prices rising slightly worldwide in Q2 2023. This is according to Knight Frank's Global House Price index, according to which overall housing in the world costs more, from 2.9 per cent in Q1 2023 to 3.0 per cent in Q2 2023. Although almost four out of ten markets have seen price declines over the past year, only about one third have seen declines in the past three months, indicating a modest improvement in market conditions globally. Italy, Spain and Portugal practically stagnated, with price increases mainly in recent months.
Rising interest rates and house prices worldwide
Real estate markets around the world felt the impact of the shift to higher interest rates, with the average annual growth rate in the 56 monitored markets dropping from a recent peak of 10.9% in Q1 2022 to the current reading of 3.0% in Q2 this year. Rising interest rates in most major economies since 2022 have had a significant impact on prices, transaction volumes and market liquidity. Financial and credit conditions tightened, lending rates increased, and as a result, house price growth moderated and became negative in many markets. That said, there are emerging signs of a stabilisation of market conditions as interest rates approach their maximum.
House prices, global forecast 2024
Strong demographic trends in major markets, limited supply of homes for sale and significant delays in new construction projects are all providing structural support to prices, especially in markets such as Australia, the US and Canada, which recorded price growth of 2.9%, 3.7% and 6.1% last quarter. Although the annual growth rate of the index increased slightly (from 2.9% to 3.0%) in the last quarter, the change in housing market conditions is not exaggerated. Even if interest rates do not rise further, the effects of past increases will continue to be reflected in the economies for some time. According to Knight Frank, we should expect a continued impact on market liquidity and transactional activity well beyond 2024.
House rents grow in the world
The easing of downward pressure on house prices will be welcomed by many homeowners, but a full recovery is still a long way off. The average growth rate of 3.0% recorded this quarter is still the lowest since Q3 2015, when European markets were still recovering from the European debt crisis. Although it will take time for house price growth to return to trend, the medium-term outlook for housing markets indicates that price pressures will continue. One of the consequences of higher interest rates has been a widespread decline in investment activity in most economies, particularly in real estate investment. The impact of this lack of investment in new housing is becoming clear in rental markets, with global rents rising at three times their pre-pandemic rate. Unless there is a significant structural reversal in housing supply, the same pressures will act to push up house prices again as interest rates fall in 2024 and 2025.
The ranking of house prices in the world
Turkey again leads the ranking for annual house price growth (96% increase), with nominal prices driven by underlying inflationary pressures. Lithuania follows in second place (15.3%), with south-eastern Europe dominating the rest of the top five positions in our ranking, with Croatia (14.0%), Greece (14.0%) and North Macedonia (12.9%). South Korea, Sweden, Finland, New Zealand and Hong Kong are currently experiencing the highest rates of price declines, falling between 12.8% and 8.7% over the past year. However, even in this part of the ranking, only Sweden saw prices fall in the last quarter.
Italy, Spain and Portugal do not see worrying values, with only Portugal increasing by 7.9% over 12 months, 4.1% over six months and 2.4% over three months. Spain sees a price increase of 3% year-on-year and 2.5 per cent half-yearly, with an increase of half a percentage point in the quarter, while Italy is virtually unchanged for the year, but registers increases of 2% half-yearly and quarterly. House prices have fallen sharply from their highs in some G20 countries, including Sweden, South Korea and Germany, and real estate investments have fallen sharply, especially in the US and Canada. However, some signs of stabilisation have started to appear in the most recent monthly data.
Below is the complete ranking of house price increases worldwide:
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