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Dubai, Russia and Slovakia show growth - 24 November 2008

The publication of the latest global house price index from Knight Frank has made headlines for a couple of significant reasons, both in terms of growth and also in shrinkage of property prices across the world.

The big headline came from the fact the global house prices fell in the past three months for the first time since records began. The survey, carried out by the global property consultancy each quarter, showed an across the board drop in house prices of 0.3 per cent compared to the second quarter of 2008. This is the first time a drop has been recorded, despite the fact that year-on-year figures showed a 3.8 per cent growth in prices.

The big winners in the price stakes over the past 12 months have been Dubai, showing an incredible 76 per cent rise in prices; Slovakia (31 per cent); Russia (27 per cent) and Ukraine (25 per cent). One of the surprise packages of those countries with rising prices over the past year was Bulgaria, showing a price rise of 26.8 Per cent on last year.

On the other side of the fence, the UK was one of the poorer performing countries in terms of average prices. A drop of 10.2 per cent was among the worst in this survey. The US continued to suffer with a drop of 16 per cent compared to the third quarter of 2007, and Canada also suffered a drop of 5 per cent.

The Baltic States have also experienced falling prices in the past year – Latvian property prices have dropped 24 per cent in a year and Estonia has seen a 16 per cent drop.

Knight Frank head of international research Nicholas Barnes said, “It is now clear that no part of the world is likely to escape the credit crunch as property prices start to fall in more and more parts of the globe. We expect that trend to continue with the majority of locations showing zero or negative growth by the end of the year.

These figures for property prices across the globe must, however, be taken in context. The index probably works very well as an indicator of the health of the economies of the countries in question, but is likely to be somewhat skewed compared to the evidence seen of property prices in the more popular overseas property destinations. These figures take the whole property market in each country into account. At the same time, in areas where overseas property buyers outnumber the domestic market, prices can tell a completely different story.

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