The average price of prime property—defined as the top 5% by value—increased by 3.2% in the second quarter, compared to 2.9% in the first three months of the year.
Additionally, according to the Knight Frank Q2 2022 Global House Price Index, prices are still rising at 10% per annum, down slightly from 10.9% in the previous quarter.
The index tracks 56 countries, of which 51 continued to show increased house prices year on year.
The report’s authors attribute the global rise in prices to “ultra-low interest rates, ample liquidity, and limited supply.”
It seems that even though there is uncertainty in financial markets, the basic rules of economics—namely, low supply and high demand—are still pushing prices up.
Which housing markets are showing resilience?
So far this year, the US, UK, Canada, and Australia have all seen their housing markets reach new highs. In the US, the S&P CoreLogic Case-Shiller National Home Price NSA Index showed that prices rose by 11.2% in May compared to the same month last year. This is the biggest annual increase since February 2006.
The UK’s housing market is also booming, with prices rising by 5.5% in June compared to the same month last year, according to the Office for National Statistics.
Meanwhile, in Canada, home prices are up 10.1% year on year, according to the Teranet-National Bank Composite House Price Index, showing the sharpest annual growth since February 2010.
And in Australia, house prices rose by 3% in the June quarter compared to the same period last year, according to the latest figures from the Australian Bureau of Statistics. This is the biggest quarterly increase since December 2003.
Topping the list on Knight Frank’s Global House Price Index was Turkey with nominal house price growth of 160.6%. While this triple digital annual growth needs to be considered in the context of their high rate of inflation, it still shows a real price growth of almost 46%.
What’s driving the market?
The reasons for this continued growth in global house prices are varied but can be attributed to a few main factors.
First, there is the ongoing issue of low supply and high demand. In many countries, there simply aren’t enough homes being built to meet the needs of a growing population. This is especially true in developed countries like the US, the UK, and Australia, where population growth is outpacing the rate of construction.
Additionally, there is the issue of low interest rates. In order to stimulate their economies, central banks around the world have been keeping interest rates at record lows. This makes it cheaper for people to borrow money and buy a home.
What can we expect next year?
Savills expects a house pricing drop of 1% in 2023, followed by a few years of slow growth. Knight Frank, on the other hand, expects house prices to continue to increase next year, albeit at a slower pace than in 2022.
While the growth of global house prices in 2022 has so far remained resilient, what happens in the second half of the year will give us a better indication of what is to come.
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