International housing market analysis based on housing commencements

Citation

Reed, R.G. (2014), "International housing market analysis based on housing commencements", International Journal of Housing Markets and Analysis, Vol. 7 No. 2. https://doi.org/10.1108/IJHMA-04-2014-0007

International housing market analysis based on housing commencements

Article Type: International housing data From: International Journal of Housing Markets and Analysis, Volume 7, Issue 2

This analysis examines the housing markets in four individual markets to highlight trends in housing market indicators; this paper places the focus on England, India, Northern Ireland and Wales. The objective is to provide an international housing market discussion and facilitate a comparative analysis. This section refers to either change in percentage of house price per annum when compared to the previous year or owner versus rented property in varying geographic locations. It should be noted that both of these metrics are limited in their interpretation, and they should be examined in consultation with other variables. For example, the percentage change in house prices should also be examined with percentage change in inflation and new dwelling commencements.

Figure 1 House price per cent change from previous year - England

The graphs in Figures 1-3 were adapted from data sourced from the and covers the 45-year period between 1969 and 2013. Over this extended period, it is possible to observe the broader cyclical trends in house price levels with the assistance of a moving trend based on a three-year moving average. refers specifically to England, where the two decades between 1969 and 1988 highlighted positive returns ranging between 7 and 30 per cent. However, a housing bust can be observed after 1989, where house prices retracted and then gradually increased, although not reaching the higher levels achieved in the pre-1989 period. After a period of respectable double-digit growth until 2004, there was another downward trend until the global financial crisis (GFC) recorded the single largest house price decline in 2008. Since then the level of house prices has gradually increased, with positive signs now appearing in the English market. The increases observed in the 1969-1988 period have never been replicated, although the level of volatility has been reduced.

Figure 2 House price per cent change from previous year - Wales

The annual percentage change in house prices in Wales is presented in Figure 2. It is possible to observe the effect of the GFC (as per England) in 1988, which was the largest single decline; however, the market in Wales displayed an overall higher level of volatility over the 45-year period since 1969. Noted are two years (1972 and 2002) where house prices increased by approximately 40 per cent more than the previous year. Although there were five years with negative house price growth (same as England), the long-term trend in Wales displays a clear property cycle trend between 7 and 14 years in length. In recent years, the level of house prices has stabilised, although history suggests this precedes another housing boom.

Figure 3 House price per cent change from previous year - Northern Ireland

The graph in Figure 3 refers to house price changes in Northern Ireland and differs from the data from England and Wales covering the same period. Over the 45-year period, there were 13 years which recorded a decline in house values, with sustained negative growth between 2008 and 2012. The housing market in Northern Ireland experienced a period of fluctuation between 1998 and 2006, followed by the largest single annual rise (2006) and a severe "bust" between 2007 and 2010. Gradually, the market has been recovering, but it has been unable to repeat the sustained returns between 1972 and 1979.

Figure 4 Owned versus rented households in India

The graph in Figure 4 refers to 22 geographical areas in India; the first column relates to the entire country of India, with the remaining 21 columns referring to 21 individual states. The data have been adapted from the 2011 government census in India, when the country's population was 246,692,667 (Government of India, Ministry of Home Affairs, 2014). In total, the 21 states represent 242,696,975 Indians. Overall, India has a high ownership rate (86.6 per cent) compared with rented households (11.1 per cent). Note there is allowance in India and in each state for "other". When examining the individual states and cities in India, there is a large variation away from this country-wide average. The lowest ownership rate is in National Capital Territory (NCT) of Delhi (68.2 per cent), which also has the highest proportion of rented residential property (28.2 per cent). The highest ownership rate (96.7 per cent) was observed in Jammu and Kashmir, with the proportion of rental households being only 2.2 per cent.

These graphs permit an interpretation of different markets which is designed to raise the awareness of the usefulness of housing market data. With increased globablisation and mobility of the workforce, it is interesting to observe how synchronised the housing markets in England, Northern Ireland and Wales are with each other. The homeownership level in India, which exceeds 85 per cent, would be surprising to many, especially in some Western countries where homeownership levels continue to decline below 70 per cent to levels not observed previously.

References

Government of India, Ministry of Home Affairs (2014), "2011 Census", available at: http://www.censusindia.gov.in/2011census/ (accessed 1 February 2014).

Office for National Statistics, U.K. (2014), "House price index", available at: http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-320865 (accessed 3 February 2014).

Richard G. Reed
Deakin University, Melbourne, Australia