The outlook for the global property market will vary across the regions according to how each countr...
The outlook for the global property market will vary across the regions according to how each country is performing economically. Property prices in the UK and US are expected to level out as interest rates rise, while in Australia there could be price falls. In Europe, the biggest rises should be in the holiday destinations areas such as Spain and France.
Milan Khatri, chief economist at the Royal Institute of Chartered Surveyors (Rics), says: "In the US, price rises have been relatively strong throughout the first six months of the year. However, the housing market will depend on the state of the economy - if it is stalling then it is likely prices could level out. Interest rates have been rising and job growth over the past few months has not been as good as expected and so the most likely scenario is that prices will level out.
"In the UK there are increasing signs the market is starting to slow down. The interest rate rises are having an impact on affordability. However the economy is still healthy so the market is likely to stabilise and remain steady throughout the year."
In Australia, analysis by Rics showed that until last year the market was booming. However, higher interest rates and changes in taxation have seen falls in prices in Melbourne and Sydney. This year the tax legislation has changed so if a property depreciates investors can no longer write off as much debt as previously. Khatri thinks it could be possible prices could fall further.
Comparisons are being drawn between the Australian and UK housing market. Some managers have been monitoring Australia closely as they believe what is happening there may be mirrored in the UK over time.
Research by Rics has shown the similarities between the socio-economic profiles of the two countries. Australia and UK have both experienced very strong house prices since the mid-1990s. Both countries have high owner-occupation rates of around 70% with the majority of owners having variable rate mortgages. Falling interest rates have underpinned economic growth with house price inflation strong and households using collateral from property and general wealth to raise borrowing and spending. The levels of debt are high in both countries.
The underlying difference is that housing supply in Australia has kept pace with household growth. There are much higher levels of investment activity in the housing market in Australia, which increases the potential for a downturn if investors decide to sell. So, although interest rates are rising in both countries, the Australian market seems more responsive to these changes.
Khatri says: "The experience of the early 1990s shows that both rising interest rates and a recession are required to cause a housing market crash. But clearly if a recession was likely the Bank of England would respond by cutting interest rates, as low inflation gives the central bank plenty of room to manoeuvre."
At Barclays, research shows UK investors are taking advantage of rising property prices in the UK to fuel a property boom in Europe. In 2003, 40% of all dwellings built on the Spanish Costas were bought by the British. Of those, 63% were bought for holidays or retirement, helping increase prices on the Spanish Costas and in the Balearic islands by 21% year on year. This is triple the traditional house price growth of around 6%-7%. A similar story has been seen in France.
Barclays puts the growth of property prices down to a number of factors. Equity release reached record levels in the UK in 2003 at around £57bn due to the rapid growth in UK property prices. Much of this has been used to buy cheaper European property outright. The costs of an average house in France is £81,000 and in Coastal Spain £87,000. Low cost airlines are flying to more and more destinations and fierce competition is keeping the costs down as mainstream airlines offer competitive deals alongside low cost carriers. Interest rates in Europe are also at historically low levels. All of this is pushing British expatriate ownership of European properties to historically high levels.
No preferred charging model
To 1,552 families and businesses
HL and Liberty SIPP slowest
Lifetime and annual allowances