India now the 14th priciest residential real estate market

• India climbed 18 spots up to 14th rank in Knight Frank’s global house price index in Q3.
• Globally, home prices across the 56 markets grew at an average of 3.5% YoY.
• Home prices in micro markets of tech hubs in India grew in double digits over three years.
  

India climbed 18 spots up to 14th rank in Knight Frank’s global house price index in the third quarter of 2023. Home prices in the country increased 5.9% year-on-year, resulting in a significant upward momentum.

Globally, home prices across the 56 markets covered by the Knight Frank’s Global House Price Index grew at an average of 3.5% YoY in September 2023. In the previous quarter, global home prices moved up by 2.2%.

As per Knight Frank, the growth in India’s residential market, despite the challenges of higher home loan rates as well as threats of inflation, is due to its stable economic growth. During the pandemic, central and state governments provided sops that triggered the market.

"In light of an increased interest cost environment stemming from heightened inflation levels, the robust domestic economic fundamentals, and the escalating aspirational attributes of residential real estate, are driving heightened demand among homebuyers in prominent residential markets within the country,” said Shishir Baijal, CMD of Knight Frank India.

A few micro markets in India, especially tech hubs in Hyderabad, Bangalore and Pune, saw sharp prices increase. The price rises in these markets are anywhere between 28-33% in three years, said a report by Anarock.

“The upsurge in urbanisation is providing additional momentum to infrastructure development, paving the way for emerging residential hubs in the urban centres of India," said Baijal.

In spite of price rises, the Indian housing market has been robust. By the end of the third quarter of 2023, as many as 3.49 lakh units were sold in the top 7 cities, against 3.65 lakh units in 2022.

Concurrently, the overall sales value of sold housing inventory also inched up to ₹3.48 lakh crore. In the first nine months of 2023, the total residential property sales value is already 7% higher than all of 2022.

“Property prices remained stagnant or experienced a decline for 5-6 years starting from 2013. During this period, the demand was notably low. However, post-Covid, we observed a substantial revival in demand, surpassing the previous highs,” said Prashant Rao, MD of Poulomi Estates.

Several factors contributed to the rise in property prices, including pent-up demand, a desire to upgrade, a willingness to spend more for better and modern amenities. Additionally, improvements in the economic scenario and infrastructure development led to an increase in property prices. While property prices surged significantly across the country, Hyderabad consistently outpaced other metros year-on-year, experiencing the highest price rise due to an influx of corporates relocating their base to the city. This trend is expected to persist.

Turkey leads the way in global price rises

Turkey held the top spot in the rankings since Q1 of 2020. It’s once again the strongest growth of 89.2% on a year on year basis. The south-eastern corner of Europe dominates the top five spots of rankings, with Greece (14%), Croatia (13.7%) and North Macedonia (11%).

Japan is the standout performer in the Asia-Pacific region, with 6.3% annual growth, followed by India with 5.9% annual growth.

“The resilience of global house prices is surprising in light of rising costs for mortgage borrowers, however strong savings, above inflation pay settlements and low supply of stock for sale are all acting as market supports. The big issue for housing markets in 2024 will remain low market liquidity, with sales volumes down by up to a quarter compared to their recent peaks- only a shift to lower interest rates will lift sales activity,” said Liam Bailey, global head of research, Knight Frank.