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Pandemic paradox: Global housing markets continued to rise strongly in Q2, defying the pandemic
Please see guide produced by MATTHEW MONTAGU-POLLOCK | September 04, 2020
During the year to Q2 2020:
Surprisingly, global housing markets remained extraordinarily vibrant during the year to Q2 2020, especially in Europe, Canada and the US. Real house prices (i.e., prices adjusted for inflation) rose in 33 out of the 49 world's housing markets which have so far published housing statistics.
The more upbeat nominal figures, more familiar to the public, showed house price rises in 38 countries, and declines in only 11 countries.
This is happening despite transaction volumes suffering an enormous hit from lockdowns and travel restrictions associated with the COVID-19 outbreak.
The most likely explanation is lower interest rates. Many central banks compensated for weak economies through lower interest rates and Quantitative Easing.
Strong house price surges have taken place in European countries, such as Turkey, Germany, Slovak Republic, Estonia, as well as Portugal.
Despite being the new epicentre of the coronavirus outbreak, the U.S. housing market remains surprisingly robust. The S&P/Case-Shiller seasonally-adjusted national home price index rose by 3.62% during the year to Q2 2020 (inflation-adjusted), an improvement from the previous year’s 1.57% growth. The Federal Housing Finance Agency displayed an even more rosy picture (from the seller’s perspective) with its seasonally-adjusted purchase-only U.S. house price index rising by 5.02% y-o-y in Q2 2020 (inflation-adjusted), up from the previous year’s 3.34% growth and the biggest increase since Q4 2015.
Thirty-four of the 49 surveyed housing markets showed stronger momentum in Q2 2020 compared to the previous year.
Recently, the International Monetary Fund (IMF) revised its 2020 forecast for the global economy to a contraction of 4.9%, down from its earlier projection of a 3% decline. The agency predicts that all regions of the world will experience negative growth this year. Despite the significant economic slowdown, recent trends suggest continued rises in housing markets, with the boost to asset values from quantitative easing outweighing the negative economic impact of the crisis.
The strongest housing markets in our global house price survey during the year to Q2 2020 included: Turkey (+11.59%), Makati CBD, Philippines (+11.52%), Germany (+10.85%), Slovak Republic (+9.13%), and Estonia (+8.28%), using inflation-adjusted figures.
The biggest y-o-y house-price declines were in Egypt (-17%), Pakistan (-4.62%), Puerto Rico (-4.44%), Malta (-3.51%), and Dubai, UAE (-3.27%), again using inflation-adjusted figures.
Momentum is stronger: 34 of the world’s housing markets for which figures are available showed stronger upward momentum during Q2 2020, while only 15 housing markets showed weaker momentum, according to Global Property Guide’s research. In fact the U.S., the current epicentre of the coronavirus pandemic, has surprisingly showed stronger momentum in Q2 2020 from a year ago. Momentum is a measure of the “change in the change”; simply put, momentum has increased if a property market has risen faster this year than last (or fallen less).
Inflation-adjusted figures are used throughout this survey. In the case of Kiev, Ukraine, the Global Property Guide adjusts using the official U.S. inflation rate since Ukrainian secondary market dwelling sales are denominated in U.S. dollars.
Source: Various series, data descriptions and sources here
The strongest performing markets:
Portugal has emerged as the strongest housing market in our global house price survey, with house prices surging by 11.59% during the year to Q2 2020, a sharp turnaround from the previous year’s 12.1% y-o-y fall, using inflation-adjusted figures. It was the second consecutive quarter of y-o-y growth in real prices since Q1 2017. On a quarterly basis, real house prices increased 7.6% in Q2 2020.
All figures that follow are inflation-adjusted.
The Philippines’ housing market made a strong comeback, after slowing sharply last year. The average price of 3-bedroom condominium units in Makati CBD surged by 11.52% during the year to Q2 2020, in stark contrast to the prior year’s 6.18% y-o-y fall. Though quarter-on-quarter, house prices in the CBD fell by 6.6% in Q2 2020.
Germany’s housing market continues to experience strong demand, buoyed by extremely low interest rates. The average price of apartments rose by a huge 10.85% during the year to Q2 2020, an improvement from the prior year’s 8.21% growth. On a quarterly basis, house prices increased slightly by 0.39% in Q2 2020.
Slovak Republic’s housing market has been strengthening, with the nationwide house prices rising by 9.13% in Q2 2020 from a year earlier, a sharp improvement from the previous year’s 3.74% growth and its biggest y-o-y increase since Q3 2008. On a quarterly basis, real house prices increased 3.43% during the latest quarter.
Estonia’s housing market remains robust, with the residential property prices rising by 8.28% during the year to Q2 2020, a sharp turnaround from a y-o-y decline of 0.96% in Q2 2019 and its biggest increase in two years. Though quarter-on-quarter, house prices fell slightly by 0.48% in Q2 2020.
Source: Various series, data descriptions and sources here
THE WORLD'S REGIONS:
Europe’s great house price boom continues
Europe’s house price boom continues unabated. Four of the five strongest housing markets in our global survey are in Europe. House prices have risen in no less than 20 of the 22 European housing markets for which figures were available during the year to Q2 2020.
Turkey’s housing market is recovering remarkably, buoyed by strong demand from both local and foreign investors. The nationwide house price index surged by 11.59% during the year to Q2 2020, a sharp turnaround from the previous year’s 12.1% y-o-y fall. It was the second consecutive quarter of y-o-y growth in real prices since Q1 2017. On a quarterly basis, real house prices rose 7.6% in Q2 2020.
For foreigners, Turkey’s currency devaluation means that the property market is very attractively priced, luring many buyers from the Gulf. In the first seven months of 2020, home sales rose strongly by 40.5% y-o-y to 854,126 units, according to Turkish Statistical Institute (TurkStat). Yet the economy is projected to contract by 5%, according to the IMF, due to the lockdowns and travel restrictions imposed since reporting its first COVID-19 case in March 10, 2020. It would be the Turkish economy’s first contraction since 2009.
Germany’s house price growth continues to accelerate, despite a coronavirus-induced economic recession. The average price of apartments rose by a huge 10.85% during the year to Q2 2020, following y-o-y rises of 12% in Q1 2020, 11.15% in Q4 2019, 9.46% in Q3, and 8.21% in Q2. On a quarterly basis, house prices increased slightly by 0.39% in Q2 2020.
Germany has long been a picture of housing market stability and one of the few countries that avoided a house-price slump in the wake of the 2008-2009 global financial crisis. However, the German economy plunged deep into recession in Q2 2020, with real GDP shrinking by a whopping 10.1% from the previous quarter, following q-o-q declines of 2% in Q1 2020 and 0.1% in Q4 2019. It was the biggest quarterly drop since Germany started to publish quarterly GDP calculations in 1970. The economy is projected to shrink by 6.3% this year, following minuscule growth of 0.6% in 2019, based on figures from the European Commission.
Other strong European housing markets include Slovak Republic, with house prices rising by 9.13% during the year to Q2 2020, Estonia (8.28%), Portugal (8.12%), Romania (7.3%), and The Netherlands (6.12%). All, except Portugal, had stronger performances in Q2 2020 compared to the previous year. Yet only Slovak Republic and The Netherlands recorded positive quarterly growth during the latest quarter.
There have been modest annual house price rises in Russia (4.82%), Lithuania (4.58%), Iceland (3.92%), Jersey (3.75%), Vienna, Austria (3.03%), and Denmark (2.13%). All except Russia saw quarterly price growth during the latest quarter. Moreover, all except Jersey and Austria, performed better in Q2 2020 compared to a year earlier.
European housing markets that are almost steady include Norway, with house prices rising by a minimal 1.12% during the year to Q2 2020, UK (1.11%), Riga, Latvia (0.85%), Switzerland (0.61%), Ireland (0.54%), North Macedonia (0.04%), and Kiev, UkraineIf customers can’t find it, it doesn’t exist. Clearly list and describe the services you offer. Also, be sure to showcase a premium service.
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