Three other markets – Washington D.C., New York City and New Jersey – are in the North East, where job growth is recovering briskly, constraints on development are tight and housing costs are very high. The remaining two markets, Phoenix and Atlanta, offer very strong growth prospects over the next five years, which should help to offset their relatively greater supply of land and looser development restrictions.
The improvement in Europe’s economies in 2004 has provided further impetus to the continent’s housing markets. Shanghai is recognized as one of the most dynamic cities in the world, and is often compared to metropolises like New York, London and Tokyo, but the main driver for buying property in Shanghai is economic growth. Everything could be conceivable through phone or by means of email. House prices continued to rise, albeit differences are clearly apparent between individual countries.
Annual house price inflation in Spain, France, the UK, Ireland and Italy has been running at double digit levels this year, although the rate of growth has slowed in most of these countries. As far as a private investor is concerned, it offers a way to participate in China’s growth story. While demand is forecast to accelerate again in the next few years and short construction times mean much of development will not go ahead without tenant precommittment.
Germany stands out as an exception – average house prices have been falling since the late 1990s due to a combination of the weakness of the economy, the cumulative effects of relative overbuilding and the reduction of housing subsidies.
Prices have been driven up in the sunbelt locations by Northern Europeans seeking second homes, which they will typically let when they are not using them. Investors are likely to remain a feature of markets given the growing disaffection with pension provision and the frustration of stock market volatility.
The increasing presence of investor buyers has also exacerbated house price inflation and in many locations local owner-occupiers seeking to buy are unable to compete. The housing markets in Central and Eastern Europe are maturing quickly as the benefits of economic prosperity filter through to more of the population.