Property remains an investment safe haven

Knight Frank’s Global House Price Index has posted its highest rate of growth in three years, with 11 countries recording double-digit growth and Australia’s prices rising by 7.7 per cent.

The Index, which measures the global mainstream housing market across 55 countries, increased by 6.5 per cent in the year to March 2017 –up from six per cent in the previous quarter.

Australia moved from 37th position in the fourth quarter of 2016, with annual capital growth of 4.5 per cent, to 20th position in March, posting a 7.7 per cent rise.

Michelle Ciesielski, Knight Frank’s head of residential research in Australia, says Australia last saw annual double-digit annual growth in the fourth quarter of 2015, when house prices grew 10.7 per cent and we raced to 4th position.

Ciesielski says tightening lending criteria, increasing mortgage interest rates, as well as foreign investment surcharges and state-based stamp duties have dampened investment.

Knight Frank established the index in 2006 to enable investors and developers to monitor and compare the performance of mainstream residential markets around the world. The index is compiled on a quarterly basis using official government statistics or central bank data where available.

Internationally, Iceland now leads the index, recording average price growth of 17.8 per cent. Knight Frank's head of international residential research Kate Everett-Allen attributes this to a lack of supply fuelling price growth.

Price growth in China has slipped marginally to 10.3 per cent as more than 45 cities implement home purchase restrictions.

Ahead of national elections, France and the Netherlands saw price growth increase, while growth slowed in South Korea and Germany. In the United Kingdom, house price growth has eased, with a 4.1 per cent increase in the year to March down from 5.3 per cent a year earlier.

In some markets, cooling measures are being ramped up while in others stimulus measures are being wound back. So why are average prices shifting up a gear?

Everett-Allen says economic growth is one reason.

“The IMF forecast global GDP to rise by 3.5 per cent in 2017 up from 3.1 per cent in 2016,” she says.

“Property’s reputation as a safe haven investment is another, along with the greater availability of mortgage finance in developing markets.”