We seem to be a nation that loves to benchmark ourselves to the global market and so it was naturally of interest to see the latest analysis by The Economist of the trends in global house prices.
The analysis is very timely as there has been some very interesting articles recently on both the NZ and Australian property market and the speculation as to the emergence (in the case of Australia) of a property bubble and in the case of NZ the continuance of a bubble.
The data utilised in the Economist article provides insight across 22 countries, across all continents and highlights recent price trends as well as long term trends and an insight into their evaluation of whether property prices are overvalued or undervalued and by how much. Certainly the picture of NZ is not certain as to future trends, but measured against other developed western economies our position is not out of line.
Recent price movement
The past year based on Q3 data for 2010 vs Q3 data for 2009 shows that from the chart below a large number of countries have seen property price appreciation. NZ has seen a 3.4% appreciation (QV data). The comparable REINZ stratified price data shows just a 0.47% appreciation based on actual sales price.
The comparable position of Singapore, Hong Kong and Australia is significantly different with appreciation over the past year of over 15%. At the the other end of the spectrum the woes of the Irish property market continue to be felt with a 17% year on year decline.
Long term property appreciation
Taking the period of 1997 to 2010 shows in the chart below a consistent global appreciation with the majority of countries seeing around a doubling of value. Clearly the performance of the past 2 years will have depressed some of these performance numbers. NZ sits again firmly at the median point with a period appreciation of 108%. Again using the REINZ stratified house price analysis this appreciation was 109.6%.
The most interesting analysis is undoubtedly the evaluation as to how over priced (or under priced) each countries properties are. New Zealand is judged to have property prices over priced by 20% as shown in the chart below.
This places NZ bang on the median spot on the podium with Australia taking its usual gold medal with property prices accessed as 63.2% over priced. It is interesting also to see our often comparatively benchmarked country of Ireland being judged as 13.2% overpriced – that after seeing a year on year negative appreciation of 17%. Just shows the extent to which that country’s property market had bubbled up in the past decade.