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You might be completely sure that property letting is a secure way to make money. Rent payments do not cover all property expenses. Does this mean that prices will sharply decline? According to real estate statistics, Great Britain and some other countries suffer from the market situation that resembles to critical. The data based on the information from real estate agencies, landlords and other sources shows slowing down of price growing in several countries. American property prices during the first quarter increased by 1 % only, which is the lowest index for the last 6 years. Prices dropped in 39 out of 220 major cities investigated. Nevertheless, the price range was 7.7 % higher than a year ago. The most intense growth was reported in California, with 18% growth in Los Angeles. But mortgage rates seem to go through an unpleasant scenario. April data estimated a 12% decline in new property buying which is the most intense price drop for the last 10 years.

 

The average price annually for property in Great Britain experienced 7.8% growth, Office of the Deputy Prime Minister reports. The ODPM index is based on property prices in various regions of the country being a more efficient statistic tool that all other indices ensuring price growth going a lot faster.

 

Australian real estate market has weakened immensely. Official information shows the 18% price growth within the first quarter exceeding the last year’s indices. However, according to Australian Property Monitors’ data, real estate prices dropped at 8% in Sydney and nearly 13% in Melbourne. Other facts point out that prices are still crawl down. Only a third part of all the auctioned properties found their new owners last weekend in Sydney. This again means that prices will continue falling. Property prices recession in Australian cities undermine the popular American and British common opinion that prices only start falling when mortgage rates are going up or there is an increase of unemployment. Australia, however, had none of those. Mortgage rates rose only up to 5.25% last year which is twice less than during the previous price recession in 1990. The unemployment level remains stably low for already 20 years.

 

The real reason for declining property prices in Australia is because of high prices that made first time home buyers leave the market as well as potential investors whose profits from rent dropped to the level of mortgage rates. This should be a good lesson for Great Britain, where the number of first time home buyers declined sharply and real estate investment seems to be less attractive.

 

However, prices do not sink in all markets. New Zealand real estate annual prices lifted at 22%. This is the most considerable growth among all the countries observed. Last year’s real estate prices had ambiguous indices in France, Italy, Spain and Ireland.

 

Last year’s real estate prices growing tempo was higher than the inflation rate in most of the countries except for Germany and Japan, where prices were going down. Property prices toward the average salary and rent rates are in record level in the US, Australia, Great Britain, Ireland, Holland, New Zealand and Spain. The return to the former level is only possible when either property prices literally collapse or salary and rent grow. The real problem here is that salaries grow at 3-4% only; years are needed for inflation to stabilize property prices.

 

Will that be a considerable decline of real estate prices or not? One thing is clear – the lowering demand for property buying will make the competition among real estate agents and companies a lot sharper in the home buying market.

 

Price change indices, %

 

	Jan. 2004	Apr. 2002	1997—2004
	Comparing to previous year
New Zealand	22,0	11,7	47
Australia	17,9	18,4	113
Spain	17,3	17,4	121
Ireland	12,9	11,1	174
France	11,8	9,3	59
Italy	10,6	9,8	54
UK	7,8	25,2	116
USA	7,7	7,6	53
Holland	6,9	4,1	75
Canada	6,3	7,0	30
Sweden	6,1	9,2	67
Belgium	5,5	9,9	54
Switzerland	3,4	4,3	11
Denmark	3,1	4,2	41
Germany	-1,7	-3,3	-3
Japan	-5,7	-4,7	-22