Key Destinations for Property Investment in 2016Using data from Knight Frank's most recent Global House Price Index and economic indicators and statistics released by governments and central banks towards the end of 2015, Propertyshowrooms.com takes a closer look at which housing markets around the world posted the biggest gains last year.
Indications are that property investors will increasingly look outside core, prime markets like London, Paris and New York and seek value even further afield in 2016. Cross-border investment is on the rise and real estate markets have become truly international in the current landscape.
House prices in Australia rose by 9.8% in the 12 months to September, according to Knight Frank, which said this was one of the fastest rates in the world.
However, the increasing unaffordability of housing and the introduction of fees for foreign investors purchasing new builds from December 2015 are likely to mean the country moves out of the top-10 strongest risers in 2016, the global real estate agency reported. After London and Hong Kong, Sydney was singled out by UBS as the world's most overvalued city in its Global Real Estate Bubble report in October.
House price growth in Canada continues to eclipse that of the US. In the 12 months to September, home prices rose by 5.6% trumping growth of 4.9% in the US, according to Knight Frank.
Property values in major Canadian cities like Toronto and Vancouver have soared, partly due to record-low interest rates making mortgages more affordable.
However, a growing number of investors are betting the market will crash, as low energy prices weigh on the country's economic outlook, according to market research firm Markit.
House prices here rose 16.7% in the 12 months to September, according to Knight Frank. UBS said in October that Hong Kong was the world's least affordable city for real estate and the second most likely after London to suffer a property bubble. Knight Frank reported in December that the Hong Kong housing market could be hit in 2016 by rising interest rates in the US, given that its currency is pegged to the US dollar. However, it forecast that house price gains would remain strong until end-2015, ensuring Hong Kong stayed in the top-5 countries for property price growth in the 4Q2015. Longer term, China's economic slowdown could weigh on Hong Kong's housing market, as wealthy Chinese grow wary of investments here or look elsewhere.
House prices in New Zealand leapt 12.6% in the 12 months to September, according to Knight Frank. Home prices in the country stood at 43% above their financial crisis lows. New Zealand Prime Minister John Key commented in October on the problem of soaring house prices in Auckland, the country's most populous city: "House prices doubled under the previous government and they've gone up pretty similar numbers under us, The population's growing reasonably rapidly; there have been supply issues, so we're doing a lot of different things. We're building a lot of houses. So to give you an example, we've got the highest consent rates and building rates for a decade, but we're building three times as many houses as we did say seven years ago when I became PM".
Property prices have risen fast in Scandinavia this year, with Norway recording gains of 6.1% in the year to September, according to Knight Frank. When S&P reaffirmed Norway's triple-A credit rating in October, it warned that "a potentially rapid correction in real estate prices constitutes an economic vulnerability that could dampen growth considerably through weakened consumption and a further falloff of investment activity".
House prices in Singapore declined by 4.3% in the 12 months to September, Knight Frank said, based on an island-wide price index for non-landed homes, where the property has no accompanying land. The drop comes as economic growth moderates in the country and is a result of a deliberate policy by the government to slow the overheated housing market. Measures taken include capping the tenure of residential loans at 35 years and increasing the stamp duty (the tax paid on purchases of property or land).
Sweden was Europe's strongest-performing housing market in the year to September, according to Knight Frank. Prices rose 11.1% year on year in part due to undersupply, according to provisional data.
"Demand is outpacing supply with household borrowing having risen at twice the rate of economic growth since 2009," the real estate agency said.
In December, S&P said that the climb in housing prices and high household indebtedness in Sweden posed risks to its banking sector and covered bond market. The ratings agency added, however, that the Swedish state would likely step in to support covered bonds if necessary. Covered bonds are debt instruments secured by a pool of mortgages or public loans.