Table 1 – Global real house price % performance, 2001 Q3 – 2011 Q3 Country
Real house price changes % 1 yr
Real house price changes % 10 yr
Real house price changes % 10 yr pa
Euro area average
Continuing a conversation from the comments of a previous post and indeed, to continue a conversation I was having with a very wealthy investor last week, I post above courtesy of Lloyds, a summary to the end of last year of key housing market trends.
Firstly there is the 10 year trend, and then there is the movements over the past year. Best of all, this is adjusted for inflation - however not for currency and so I will come to that later.
Clearly, from the chart above we can forget about some major countries, Germany, Japan, Ireland. In fact let's look at beating the UK. Given London is a much better performing place than the UK and we don't want Eurozone because of um..political risk, I am only going to focus on those Countries that are better than the UK performance, preferably double with FX performance tied in.
Of these though, you can't as a foreigner buy a place in India. In South Africa you need a 50% deposit as a foreigner so I don't fancy either of these two. Russia's house prices are collapsing so perhaps the volatility there won't be for everyone and having been to Moscow in winter I can think of better places.
This leaves Hong Kong, Lithuania, Norway, New Zealand and Australia.
Lithuania - interesting; prices are cheap, it's close to the UK, the currency is though depreciating versus the pound, but the Lithuanian economy has recovered well since 2008 - better than the UK. Long-term, this could be OK. Property prices are still falling, but this is tailing off.
Norway - here the deal is on the currency, with the NOK being safe haven and in a 4 year uptrend against the Pound where it has gained 25%, together with strong house price growth this has to be a leading contender. Taxes are not too bad, although rental tax is 28%.
Hong Kong - HK prices rebounded quickly from the low of 2009 and the HKD is stable versus the Pound. With many similarities to London this could be good. However, its a long way for an investment and if the China property bubble bursts, will their be spill over?
Australia - Prices are falling in Aus nearly as fast as the UK, certainly not slightly rising as in London. However, the Aussie dollar is 40% up on the pound in 10 years and the trend continues, wiping out any worries about making a loss. A good place for a currency/property hedge if you can hack the distance?
New Zealand - See Australia above!
London - As the global property safe haven, what could go wrong? Well the currency risk is the main issue, along with increasing property taxes and a weak London economy. Prices will seemingly always hold up and rise, perhaps more in a crisis - but that currency risk with the UK prone to quantitative easing does stop London from being an easy winner.
My overall assessment would be:
On a budget and - Look to Lithuania
For real safety close to home - look to Oslo - perhaps Oslo property is the new gold?
Long term - Aus/NZ is the better bet than London
Medium term - London