Global house price growth slows: knight frank warns of affordability limits

Global house price growth has slowed to 2.6% in Q2 2024, down from 4.1% in Q1. Knight Frank warns that without further interest rate cuts, property markets may struggle to sustain growth.

Knight Frank’s latest analysis reveals a significant slowdown in global house price growth, with the annual rate of increase dropping from 4.1% in Q1 2024 to 2.6% in Q2.

This marks a substantial decline from the long-term average of 5.3%, signalling that affordability issues are impacting many housing markets worldwide.

Price growth slowdown signals affordability limits

The report highlights that global housing markets have been struggling since late 2022, as rising interest rates pushed up mortgage costs, squeezing affordability. While there was a brief resurgence in prices during mid-2023, driven by stronger earnings growth, the latest data shows that further price growth is unlikely without additional stimulus, such as interest rate cuts.

“Price growth across global prime markets has slowed, and without further rate cuts, the recovery in property prices we’ve seen in recent quarters is likely to run out of steam,” explains Liam Bailey, head of global research at Knight Frank.

More markets seeing price declines

Knight Frank’s data shows that 25% of global markets saw annual price falls in Q2 2024, up from 18% in Q4 2023. Notably, the number of markets experiencing strong growth (annual price rises of more than 5%) dropped significantly, from 32% in Q1 to just 13% in Q2.

Key markets like Madrid and Dubai have experienced the sharpest slowdowns. Madrid’s growth plummeted from 17.2% in Q1 to 6.4% in Q2, while Dubai saw its market move from a 15.9% increase to a slight decline of 0.3%.

Despite Dubai’s dramatic cooling, the city’s property prices have surged by 124% since 2020, making this dip a much-needed pause after rapid expansion. Miami, which saw a 77% rise in prices since early 2020, is regaining momentum with a nearly 8% increase over the past year.

Europe strengthens amidst global slowdown

While global markets have generally slowed, Europe is showing signs of resilience. Six of the ten fastest-improving markets are in Europe, led by Stockholm. Despite prices still being down by 2.6% year-on-year, this is a marked improvement from the -6% seen last quarter.

Markets in New Zealand, however, are seeing a collective downturn, with cities like Christchurch, Wellington, and Auckland experiencing significant slowdowns in growth.

Future growth depends on central banks

According to Bailey, the outlook for global house prices is now largely in the hands of central banks. “The biggest factor influencing future price growth will be central banks’ willingness to cut interest rates over the next 12 months,” he said.

As affordability remains a pressing issue, any further rate cuts could provide the stimulus needed to reignite price growth in many markets.