Home prices grew by the most in about 18 years globally last year, as significant savings built up during two years of the Covid-19 pandemic triggered a desire to either upgrade homes or acquire a second property, consultancy Knight Frank said in a report on Wednesday. Property prices across 150 cities tracked by its global residential index rose on average by 11 per cent last year, with 140 of these urban centres recording increments, up from 122 in 2020. Home prices in Hong Kong languished in the bottom quadrant of the index, ranking 123rd with a growth rate of 3.6 per cent. The city held the same spot in 2020, when its home prices declined by 0.1 per cent. With monetary authorities across the world winding down loose policies to temper rising consumer prices as job markets recovered, the trend of surging home prices was unlikely to be sustained, said Martin Wong, director of research and consultancy for Greater China at Knight Frank. “The current high growth rates for housing prices are not expected to be sustained in the long term due to rising interest rates and increasing base prices. Some cities also face an inflation problem and thus the real housing price growth is not as high as it appears based on nominal values. That said, housing price growth will stay in positive territory for the foreseeable future,” he said. Hong Kong analysts slash forecasts in home prices as Covid-19 bites The Knight Frank report comes after the US Federal Reserve increased interest rates for the first time since 2018 on March 16. A day later, the United Kingdom’s central bank also hiked interest rates for a third time since December last year. Central banks in the Middle East and Hong Kong also raised interest rates last month. In Hong Kong, US-based investment bank Goldman Sachs forecast that home prices were likely to fall by a fifth over a four-year period, as borrowing costs rose and demand slumped because of rising unemployment. Goldman cut its forecast from flat prices this year, followed by 5 per cent declines in 2023 and 2024 and a return to flat prices again in 2025, with a 5 per cent decline in each year between 2022 and 2025. Elsewhere, Istanbul, Turkey’s economic, historical and cultural hub, topped the index with a growth of 63.2 per cent in a year. Overall, however, cities in the Americas saw the highest average annual growth of 15 per cent, outstripping the 11 per cent rise seen in Europe, Middle East and Africa, and the 9 per cent recorded in Asia-Pacific. ‘Worse to come’ as Hong Kong home prices drop by most in two years “US households not only accrued significant savings during successive lockdowns, but the equity in their homes expanded significantly too. In some cases, this wealth has been used to upgrade existing homes or to purchase a second property,” the report said. “A typical home in Phoenix, the US city with the fastest rising prices in 2021, was worth US$298,000 the end of 2020, according to Zillow. By the end of 2021, its value had jumped 32.5 per cent to US$394,850, adding almost US$97,000 in one year to a homeowners’ pool of equity. This surge isn’t atypical of cities in advanced economies,” it added. In the US, household wealth jumped to a record US$150.3 trillion in the last quarter of 2021, according to a report released by the Fed last month.