Thursday, June 4, 2009 | MANILA, PHILIPPINES [ BusinessWorld Online ]
Makati values down by 2% in Q1; Thailand recovers
Real estate agent Shellie Young from Fortune International Realty shows a home that is on sale to prospective buyer Brandi Prescott in Miami, Florida. The National Association of Realtors has announced that its seasonally adjusted index of sales contracts signed in April rose by 6.7% to 90.3. — AFP
HOUSE PRICES dropped further around the world — including in the Philippines’ most expensive property market — as personal consumption expenditure decreased, consumer confidence remained low, credit remained tight, and the unemployment rate worsened.
The housing crisis contagion reached more countries in the first quarter. Among the 32 countries in the Global Property Guide’s survey of house prices, 27 recorded price falls during the year to the end of the first quarter of 2009, in real terms.
Year on year, housing prices in Makati went down by a little over 2% in the first quarter in real terms. Compared to the previous quarter, prices also inched down by about half a percent.
In nominal terms, Makati housing prices went up by 4.58% year on year, but were lower by under a percent compared with the last quarter of 2008.
The Global Property Guide uses price-changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents.
In the first quarter, price falls of more than 10% occurred in 12 countries, worse than the previously worst-ever year to end of last quarter of 2008 (eight price falls above 10%).
However, only seven countries saw price falls of above 5% during the single quarter, versus eight countries during the previous quarter, though some individual price declines were much higher during this quarter than in the previous quarter.
Latvia is in surprisingly deep trouble. Average apartment prices in Riga declined by an astonishing 50% over a year earlier, to _747 per square meter, with a 30% drop during the quarter. Latvia is in deep recession, with its economy contracting 18% in the first quarter.
Dubai’s house prices dropped 35% over a year earlier, and 42% over a quarter earlier. Dubai’s economy is closely tied to the global market. As uncertainties piled up, demand for properties collapsed. Many developers have delayed or postponed construction of projects. Credit has also been tight. Interest rates have increased, and loan-to-value ratio reductions have been imposed.
Among Asian countries, Singapore’s housing market suffered the most. House prices plunged by 23% in real terms over a year earlier, and 13% over a quarter earlier. This is the biggest decline since 2000. Singapore is heavily dependent on exports. When the global financial crisis began, demand waned. In the first quarter, Singapore’s economy contracted by 10.1%, mainly due to a decline in manufacturing production.
There is no clear sign of recovery in the United States housing market. The S&P/Case-Shiller House price index dropped by 19% (inflation-adjusted) to the end of the first quarter over a year earlier. Case-Shiller’s figures also show a larger decline in the first quarter of 2009 (6.5%) than during the last quarter of 2008 (4.5%).
Other industry figures revealed much more modest price drops of 3% and 2%, respectively, and showed quarter-on-quarter figures which are already positive.
Case-Shiller weighs by price, arguably biasing it to the upper-end, while others weigh by unit, with the opposite bias. The Case-Shiller Index is based on data from county assessors and record offices and emphasizes urban areas.
Others cover loans through Fannie Mae and Freddie Mac in the whole of the US. The Case-Shiller indices only use purchase prices in index calibration, while the HPI also includes refinance appraisals.
Meanwhile, house prices in Bulgaria fell by 14% (inflation-adjusted) over a year earlier. Bulgaria’s house prices started to slip during the last quarter of 2008, as foreign demand for properties weakened.
Despite the grim situation in the global market, a number of countries have remained resilient.
Switzerland’s house prices rose by 4% in the first quarter over a year earlier. The decrease in interest rates, and a surge in the number of foreign residents, kept property demand stable.
House prices in Thailand, Austria and Israel bounced back.
In Thailand, price of single detached houses with land are up 4% compared to the same period last year. This is the first increase since 2006.
National house prices in Austria are up by 3%, after falling by an average of 3% in 2008. House prices in the capital, Vienna, have continued their upward trend, rising by nearly 3% during a single quarter, in the first quarter. After consecutive falls in the last two quarters of 2008, Israel’s house prices rose by 3% in the first quarter.
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