MaltaToday | 10 September 2008

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NEWS | Wednesday, 10 September 2008

Knights Frank report house price drop in Malta

International estate agents Knight Frank have reported that house prices across the globe, including Malta, are encountering steady decline as a result of the US property crash.
Latvia has recorded the sharpest fall with house prices falling by 24.1% over the past year. New Zealand, Denmark and Lithuania have all seen falling prices, along with Malta, Germany, Ireland, Estonia, Britain and the US.
In the second quarter of 2007, Malta’s home prices appreciated by 0.2% according to Knights Frank, but have now declined by 2.7%.
The rapidly depreciating housing markets show that rising inflation and mortgage costs are real risks for the emerging economies of Europe, particularly those that have seen high levels of investment activity over recent years.
Housing markets in countries such as Spain, Denmark, the UK and Ireland are also being severely challenged by the global credit squeeze.
The only countries to have bucked the trend are Bulgaria, Slovakia, Cyprus and the Czech Republic, where house price growth has accelerated. The economies of central and south-eastern Europe appear to be the strongest performers, while northern Europe (including the Baltic States), together with the United States, are suffering the most.
Since 2007, foreign direct investment and a growing manufacturing base made Bulgaria the best performing location in the Knight Frank index, with annual growth of 32.2%.
In Slovakia, where GDP rose by 10.4% in 2007 alone, prices have grown by 25.4% over the past year.
And rising tourist and second home demand continues to push prices upwards in both Croatia (5.8%) and Cyprus (12.9%).
Last year’s fastest growing market, Russia, which was seeing house price growth at an astonishing 53.7% in the second quarter of 2007, has dropped back to 26.5%.
Denmark appears to be suffering most of all the Western European economies, with annual price falls amounting to 9.6%. The root causes are a slowing economy and increasing problems with interest rates and mortgage finance – a crisis highlighted by the high-profile rescue of Roskilde Bank earlier this year in the wake of €1.24bn of losses from bad debt, concentrated in the housing sector.
Prices in Germany show an annual fall of 2.5%, down from 4.4% last year, and the rate of price falls is declining on a quarterly basis. There is less demand for owner-occupied property in Germany than in many other European countries and there is no shortage of supply. The economy is also slowing. Industrial orders have fallen for six months in the row, the worst run since the early 1990s.
In Spain, the Knight Frank index recorded a price rise of 2.4% annually, but it warned that falls are now almost inevitable. “Spain looks likely to fall into recession later this year, and house sales fell steeply during June. The number of sales dropped by 34.2% in May and 29.6% in June, suggesting that wider price falls could be imminent.”
So far, price falls have been concentrated in the coastal resorts and among new developments in the larger cities, and the changing climate in Spain has not yet influenced the figure listed in the index.

Biggest drops in price
(Year-on-year change to Q2 2008)

Latvia -24.1%
United States -16.8%
Estonia -16%
Lithuania -9.9%
Denmark -9.6%
Ireland -8.1%
UK -3.9%
Malta -2.7%
Germany -2.5%
New Zealand -2.2%

 


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