Knight Frank has published its latest figures for the 55 property markets included in its global house price index. To set the scene, the index has grown by some 3% over the last year, up from 2.3% in the previous year. Some 43 of the 55 housing markets tracked in the global house price index saw prices rise, up from 10 countries in the aftermath of Leman’s collapse in 2009. Turkey leads the rankings with prices rising by some 18% during 2015. This was because Turkey is viewed as a safe haven for Middle Eastern investors and is also seeing strong population growth. Knight Frank expect the indexes overall rate of growth to be weaker in 2016 than 2015. The global economy is experiencing a potentially dangerous cocktail of low oil prices, a strong dollar and a continued slowdown in China. The worst performing market, incidentally, was Ukraine where prices dropped by 12% during 2015. Of course, the index does not take into account currency fluctuations.
Obviously, when it comes to considering where to invest it makes sense to take the currency exchange rate into account. Indeed, if one does so the top five Knight Frank markets become:
- Iceland (+9%)
- Hong Kong (+7.1%)
- Israel (+6.7%)
- Sweden (+12.3%)
- USA (+5.4%)
Once one takes the strengthening of sterling into account over the period Iceland becomes 20%, Hong Kong 17.4%, Israel 16.8%, Sweden 16.2% and the USA 15.6%. Personally if I was picking any of these areas to invest in I think I would probably choose Iceland because the Landsbankinn has forecast that property prices in Reykjavik are likely to rise some 24% between this year and the end of 2018 or the USA because it is so stable and its economy is so strong.
The worst losses in the world, according to Knight Frank, were experienced in Ukraine where the property market fell 12% or, if you priced it in sterling by some 60%. I have to say I might be strongly tempted to invest in Ukraine at some point in the near future. Of course, Russia’s war against the Ukraine is still very much continuing. Fighting in south east Ukraine has carried on throughout the winter and early spring with Ukrainian officials reporting up to 70 attacks a day. Of course, if Russia ends up taking over all of the Ukraine it will be bad news for investors. When it took over the Crimea it immediately seized around 400 businesses including 200 health centres, all ports, airports, water and power facilities, railways, wineries and agricultural enterprises. It should also be remembered that inflation in the Crimea is running at nearly 30% a year. Still, now could be the time to buy, say, a farm in the region.
Brazilian property is very much up and down at the moment. Those that hope the World Cup and the Olympics would push the property market upwards has found otherwise. Last year it fell by around 1% and if you price the property in sterling it fell close to 30%. At the beginning of 2016 there was a commodity rally but, nevertheless, the fluctuation of the real and other factors such as corruption and health scares will make many investors shy away from buying into Brazil. I think it is less of a punt than the Ukraine, but still a punt. 20.6.16