In the latest edition of Knight Frank’s Global House Price Index, which monitors and compares the performance of 55 mainstream residential markets around the world, Ireland has slipped down the global rankings from 12th at year-end 2015 to 23rd at year-end 2016 as the pace of global house price growth accelerated.
In total, the Global House Price Index increased by 6% in 2016, the highest annual rate since the first quarter of 2014. Despite the global landscape of political and economic uncertainty the overall picture is one of stable or rising prices with 47 markets recording price rises in 2016 compared to 43 in 2015. Due to its strengthening economy, two interest rate cuts and strong interest from foreign buyers, prices in Iceland increased by 14.7% on average in 2016 knocking long-time frontrunners Turkey and Sweden off the top spot. A weakening lira, an interest rate rise to 8% and recent security concerns have dented household confidence in Turkey while new rules imposing higher deposits and loan caps have cooled house price growth in Sweden. Staying in Europe, the Baltic States are quietly creeping up the rankings. Lithuania, Estonia and Latvia all sit within the top 20 and together averaged 9.9% growth in 2016, up from 5.2% a year earlier.
Ireland’s fall to 23rd comes as prices increased by 6.0% in 2016, down from 6.6% in 2015. It is unlikely that this trend will continue into 2017 and we anticipate that Ireland will rise in the rankings in 2017 once again. Ireland, unlike many countries in the index who have recently enacted measures to cool demand, has recently introduced a Help-to-Buy Scheme and has relaxed its mortgage lending restrictions. Early signs suggest that these initiatives are having an impact. According to the Banking and Payments Federation, €585 million worth of loans were approved for home purchases in February – a 54.4% increase in relation to February 2016. First-time buyers have driven the increase, with nearly half of February’s mortgage approvals earmarked by banks for that market segment. This is likely to translate into home purchases with a number of agencies, including Davy and Standard & Poor’s, forecasting that house prices in Ireland will grow by 7% and 8% respectively in 2017 which could push Ireland up the rankings.
China rapidly ascended in the rankings this year, rising from 43rd position in 2015 to 7th position in 2016. The phenomenal growth rates of a number of Chinese cities in 2016 particularly Nanjing, Shanghai and Shenzhen, which grew by 42.5%, 39.5% and 34.5% respectively in the year to Q3 2016 according to Knight Frank’s Global Residential Cities Index, have seen prices in China grow by 10.8% in 2016 having only grown by 0.4% in 2015. This trend is unlikely to continue in 2017 as a number of these cities have recently been subjected to lending restrictions. A strong economic outlook and buoyant employment forecasts are boosting US household confidence with prices rising by 5.8% in 2016.