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• Almost every major world economy hit by declines
• Report warns no country immune from downturn
House prices are now falling in almost every leading economy around the world as a result of the global financial crisis, with the UK experiencing some of the steepest declines, according to two significant reports published yesterday.
Of the 42 economies surveyed, 34 saw falls in the value of domestic property during the last three months of 2008, according to the upmarket estate agency Knight Frank. By comparison in the same period of 2007 house prices were falling in just a quarter of the world's biggest countries. Knight Frank said yesterday that it was now clear no market would escape unscathed from the financial crisis.
A separate study by the Royal Institution of Chartered Surveyors (RICS), also released yesterday, revealed by how much Europe's housing market fell last year.
The UK recorded the second-steepest annual price decline - after Latvia - out of the 42 countries Knight Frank examined.
It said house prices fell by 14.7% in the UK during 2008, with 5.1% of the slide coming in the final quarter of the year. Dubai was the strongest performer in 2008, with house prices soaring by nearly 60% over the year, but much of this gain is expected to be wiped out in 2009. Other countries to defy the slowdown last year were Russia, the Czech Republic and Israel.
At the other end of the scale, Latvia saw the steepest price slides on both an annual and quarterly basis, with prices dropping by 16% in the final three months and by 33.5% over the whole of 2008.
Iceland also suffered badly, with prices falling by 14% during the year, with 11.3% of the slide coming in the final quarter following the collapse of its banking sector.
The United States and Ireland were also leading the fallers' table, with annual price drops of 12.1% and 9.1% respectively.
The group said house prices rose by more than 10% last year in seven countries surveyed, although it warned values had now started to fall in six of them.
Nicholas Barnes, head of international residential research at Knight Frank, said: "The current downturn is unlike any other we have ever witnessed in both scale and causes. This year is likely to be more difficult than 2008; however, there is a 'consensus of hope' that the trough of the current cycle will be reached in 2009, although a bounce-back is not anticipated and the current fragility of markets could be exposed by further bad news from the financial sector or indeed the underlying economies.
"At some point, however, buyers will decide that price falls in many markets represent once-in-a-generation opportunities that are too good to pass up."
Meanwhile, the scale of the collapse of the European housing market was dramatically illustrated by the annual RICS survey. The surveyors group said the Baltic states saw the sharpest falls last year - with Estonia sliding by 23% - followed by the UK with a drop of 16%, France falling 10%, and Ireland, where values fell 9%. It warned that countries where house prices had not boomed in previous years had still been hit hard by the credit crunch - Germany had a second year of price falls, down 2.2% in 2008.
RICS said prices in Italy, the Netherlands, Switzerland, and Greece were flat but did not fall during 2008. Prices all fell substantially in Norway, Poland and Denmark. In France, home sales fell by 30% in 2008 and prices are expected to continue to slide in 2009 as the economy weakens, it said.
The report's author, Professor Michael Ball of Reading University, said: "The world financial crisis and economic downswing have hit European housing markets badly. Some countries, like Ireland and the UK, led the decline but by the last quarter of 2008 the effects had spread across Europe."
Simon Rubinsohn, chief economist at RICS, said: "Ensuring a ready flow of mortgage finance needs to be an important priority for European governments but the key to providing support for property markets across the region is effective measures to underpin the economy."
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