Our latest round-up shows that prices are on the rise in most markets…

THIS time last year, The Economist’s survey of global house prices was a sea of negative numbers. That was then. Of the 20 markets tracked in our latest survey, only four still posted year-on-year declines and only Ireland’s property catastrophe has worsened. (America’s FHFA index, which excludes houses that are financed with large mortgages, was also down, but the country’s Case-Shiller national and ten-city indices rose modestly.)

Asia’s price rises lead the way, as they did when the data were last published in July. Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is down a bit from the summer. House prices in China rose by 9.1% in the year to September, compared with a 12.4% rise in May. That is still too fast for the government, which unexpectedly raised interest rates on October 19th and has outlined more measures to cool the market in recent weeks, including higher down-payment requirements and the introduction of a property tax in some cities.

Our analysis of “fair value” in housing, which is based on comparing the current ratio of house prices to rents with its long-run average, suggests that China has less to worry about than the likes of Australia, which is again the most overvalued of the markets we track. That makes it all the more surprising that Australia’s central bank opted not to increase its benchmark interest rate this month.

Europe shows a familiar split between core countries and peripheral ones. Ireland, Spain and Italy continue to suffer year-on-year price declines; German and French homes have shown big gains in value over the past year, a particular turnaround for France since our previous round-up. The British housing sector’s talent for defying gravity may be on the wane. The pace of annual appreciation in the country’s property market has slowed over the summer. British housing is still overvalued—outright falls may loom.

America’s housing market, almost alone among those which experienced a big bubble, is more or less fairly valued at this point, at least according to price-to-rent ratios. But price rises may not last for long. Earlier gains were driven by substantial reward programmes and government subsidies, many of which have now lapsed. America’s overhang of housing inventory may get worse if concerns over lenders’ foreclosure processes jam up sales. The temptation for the country’s 11m underwater borrowers to walk away is another threat (see Economics Focus). And being at or below fair value is no guarantee of a bounce in prices: Japanese housing fell by 4% in the year to the end of the first quarter, despite being stuck far below its long-run price-to-rents ratio.

Report by Finance and Economics – The Economist.

Northern Ireland property prices rose 1.6% during the past three months, the Nationwide building society has said.

It said NI was “surprisingly” the best-performing region in its survey, but the trend was still falling prices.

The 1.6% rise was not enough to offset previous falls, it said, “so the annual rate of house price falls actually accelerated from 5.2% to 11.1%”.

Northern Ireland was the only region in its survey where housing market activity had declined in the past year.

In London, the number of house purchase loans rose 42% year-on-year, but Northern Ireland saw a 2% fall.

It said Belfast was the strongest area of Northern Ireland’s housing market, with prices down 4% year-on-year.

Report from BBC Northern Ireland.

House sales in the UK fell in September for the second month in a row, HM Revenue & Customs figures show:

Completed sales in September were 78,000 – down from 82,000 in August and slightly lower than in September last year.
This was the first a year-on-year fall in sales in 2010.

Meanwhile the Bank of England said mortgage borrowing was becoming more difficult and would stay subdued in the coming months.

“To see the number fall from 12 months ago is a worry,” said housing commentator Henry Pryor.

“If transaction volumes continue to fall then we will see even greater uncertainty in house prices in the coming months making it harder for those who have to sell to find a willing buyer.”

Fresh downturn

Several recent surveys and reports from lenders and property professionals have recorded a fall in mortgage lending and a renewed decline in house prices.

On Wednesday the Council of Mortgage lenders (CML) said total mortgage lending in September had been £12bn, the lowest September figure since 2000.

That was 1% lower than in August but 7% down on September last year.

The Bank of England, in its latest monthly publication “Trends in Lending”, revealed that this recent downturn in demand for mortgages had taken lenders by surprise and that lending would “remain subdued”.

“The shortfall [is] partly reflecting a weakening in confidence among potential homebuyers against the backdrop of some weakening in the outlook for house prices and uncertainty about the effects of government spending cuts,” the Bank noted.

It said most lenders expected prices to be stable or to fall in the coming months.

And the Bank warned that borrowing would become more difficult again for those with small deposits, especially first-time buyers.
“While the availability of new secured lending at LTV (loan to value) ratios greater than 75% had increased over the past year, respondents were expecting a decrease over the next quarter,” it said.

BBC News Report

Find out more about property in Ireland