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UK property prices have increased by an average of 50% in real terms since 2001, ranking the market 13th for capital growth in the world, according to the latest Lloyds TSB global housing market review.
Despite stringent mortgage lending conditions, the UK property market is ultimately being supported by a genuine housing shortage in relation to existing demand, which is being fuelled in part by an influx of foreign property purchasers, particularly in London.
Aside from a favourable currency exchange rate, the majority of foreign buyers purchasing properties in London do so because they view the market to be a safe place to preserve wealth as they face political, economic and financial upheaval in their home markets.
Greek buyers more than doubled their spending on properties in prime London in 2011 last year while the Italians recently overtook the Russians as the leading buyers of prime London homes. Asian buyers from Malaysia, Singapore, mainland China and Hong Kong are as active as ever.
Asia is the fastest-growing region for cross-border sales of new homes in London; many housebuilders have achieved significant success across the region, especially as property prices in Asia have been escalating at a rapid pace, creating bubble fears.
According to the Lloyds TSB global housing market review, the largest increase in global property prices since 2001 has been recorded in India, with an average increase of 284%.
The Indian home prices have increased at an annual rate of 14% which is almost six times the rise in real UK house prices and ten times the 23% increase in the Euro area.
Four of the top six performing housing markets since 2001 are found in emerging markets economies, with Russia, up 209%, second to India, followed by South Africa, where average property prices have appreciated by 161% over the last ten years.
Six countries posted negative house price growth over the period, including Ireland, down 23% lower, and Germany, where prices have fallen 17% in real terms.
Suren Thiru, economist at LloydsTSB International, said: “Looking forward, the outlook for house prices globally is likely to be determined in part by the pace at which the global economic recovery continues, the events in the Eurozone as well as the economic prospects of individual countries.”
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