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Emerging markets top global house price league

Monday 19th March 2012

Emerging markets saw the biggest increases in house prices over the past decade, according to the Lloyds TSB International Global Housing Market Review.

Emerging economies accounted for four of the six top performing housing markets since 2001, including the three countries with the biggest rises.

Overall, Indian house prices have risen by the most since 2001, having increased by 284% in real terms (after allowing for consumer price inflation) since 2001 - equivalent to an average annual rise of 14%. This is almost six times the 50% rise in real UK house prices over the same period and over 10 times the 23% rise seen in the Euro area.

After India, Russia recorded the next biggest increase (209%), followed by South Africa (161%). Overall, house prices across the 32 countries tracked have risen by an average of 56% in real terms over the past decade.

House prices have typically risen fastest in those countries with the fastest growing economies. The substantial rise in Indian house prices over the past decade is partly a reflection of the 280% rise in Indian GDP over the same period. Overall, GDP has increased, on average, by 155% in the ten countries with the biggest rises in house prices since 2001. This is almost four times the average 43% rise in GDP in the ten countries with the worst house price performance.

Since 2001, half of the six countries that recorded a fall in house prices over the past decade - Japan, Germany and United States - are members of the G8, the world's eight largest economies. Japan recorded the biggest fall in house prices (-30%), followed by Ireland (-23%) and Germany (-17%).

The rise in real UK house prices over the past decade (50%) was the 13th highest increase among the 32 countries covered in the report. Six countries - India, Russia, South Africa, Lithuania, Hong Kong and Bulgaria - recorded price increases over the past decade that were more than double the rise in the UK.

Real house prices in the euro area have risen by an average of 23% since 2001, less than half the UK growth. Five of the countries saw a better house performance than the euro zone average: France saw the largest increase (82%), followed by Belgium (69%), Finland (61%), Spain (46%) and Italy (31%). In contrast, there were real price declines in Ireland (-23%), Germany (-17%) and Portugal (-11%) over the decade.

In the rest of Europe, outside the Euro area, there were large gains in Norway (72%), Iceland (37%), Switzerland (30%) and Denmark (25%).

Suren Thiru, economist at Lloyds TSB International, said: "Overall, house price growth during the past decade has generally been stronger in the countries with the fastest growing economies. A house price divide appears to be opening up with the general outperformance of the housing market in emerging economies compared to more developed nations appearing to reflect the stronger economic performance of these countries.

"Looking forward, the outlook for house prices globally is likely to be determined in part by the pace at which the global economic recovery continues, the events in the euro zone as well as the economic prospects of individual countries."

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Mike Jones

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