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Despite some of the fastest increases to global interest rates in history, residential prices only dipped slightly at the beginning of this year, with Australia ranking 18th out of 56 countries for price growth.
According to Knight Frank, Australia ultimately recorded a 4.9 per cent increase in house prices over the year to Q3 2023, higher than the annual price growth across the global market, which came in at 3.5 per cent.
The report showed that even as mortgage costs increased across the world, property ownership was still highly prized and buyers were prepared to accept higher home payments. Australia was one of 35 markets that experienced annual price growth, while just 21 of the 56 countries witnessed declines.
Once again, Turkey topped the ranking for price growth – a position it has been holding since Q1 2020 – this year recording a whopping annual rise of 89.2 per cent. Croatia, with a 13.7 per cent increase, and Greece, where home values were up 11.9 per cent, rounded out the top three.
On the other end of the scale, Sweden experienced the greatest decline in house prices, with values dropping 11.1 per cent over the 12 months to the end of September.
Still, prudential regulation clearly had some impact, with Knight Frank’s head of residential research, Michelle Ciesielski, noting how much home price growth had slowed since the beginning of 2022, when interest rates across the globe were on the rise, or about to be lifted.
“The rate of annual price growth reached a peak of 10.9 per cent in Q1 2022 but sharply slowed to 2.2 per cent in Q2 of this year,” Ms Ciesielski noted.
When adjusted for inflation, Knight Frank found that real house prices were only 2 per cent below their 2022 peak globally, despite higher rates.
“The upturn in the latest quarter indicates strengthening price growth in several markets, including Australia, Ireland, Sweden, the UK and the US, despite rising interest rates and therefore higher costs for mortgage borrowers,” she said.
According to Ms Ciesielski, many of these major markets were home to similar factors as those causing Australian prices to rise.
“The resilience of house prices can be attributed to limited available stock, strong employment and robust wage growth,” Ms Ciesielski noted.
Knight Frank’s head of residential, Erin van Tuil, emphasised the impact that housing supply was having on a global scale.
Sales volumes were found to have declined by 15 per cent to 25 per cent from recent peaks across developed economies.
“The absence of a pricing correction indicates that this constraint on activity is expected to persist, likely through 2024 and potentially well into 2025. Activity is anticipated to rebound when rates are substantially lowered,” she said.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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