March 25, 2010
All this talk about Canada’s incredible rebounding market might make us ignore the fact that the rest of the world is struggling to recover. Okay, so there have been a couple other strong players. In Shanghai, prices have risen 50% and London is on the way to recovery as well.
So that’s the good news…let’s move on to the markets that aren’t so hot. Three quarter of the markets included in Knight Frank’s Prime International Residential Index declined in the last three quarters of 2009.
In last year’s report some 41% of the prime markets saw annual price falls but in 2009 it was 73%. The steepest price drops were in Dubai, down 45%, the Western Algarve at 30% and Dublin at 25%. While Barbados saw price falls of 20%, the steepest in the Caribbean, and even some locations in Asia saw falls although small compared with elsewhere, most significantly Kuala Lumpur with a 1.8% fall. Nuwire
It’s definitely not ALL bad news. Most of the declines occurred in the first half of last year. For example, New York’s prices fells 12% in 2009, but gained 2% in the final quarter. Also, as always in real estate, location was important for determining where prices fell. In coastal and country second home locations prices declined by 14% and 11.9% respectively. However, prime city locations posted an average rise of 0.4%.
Lower interest rates should continue to encourage purchasers to push prices up and keep the carrying cost of a home low for those close to foreclosure. Real estate is a highly self-correcting market. As prices decrease, development projects are held off which reduces supply and, in turn, makes prices increase.