Sign of India's rise - fastest growing house prices
Data alert | Country comparisons of residential property prices + Investment Tips below.
In a sign of its growing economic strength, India has outpaced advanced economies in residential property price growth since 2009. It tops the global rankings, followed by Chile and Estonia.
The chart below doesn’t measure housing affordability as such but instead shows the percentage increase in average residential property prices by country. The price changes are 'nominal' not 'real', meaning they have not been adjusted for inflation.
Interestingly, Australia sits roughly in the middle of the pack. Since 2009, average house prices here have risen by 114%, slightly above the global average of 100%. Emerging market economies have seen average price growth of 120%—though that figure comes off a much lower base.
Only two countries have experienced house price declines over the period: Cyprus and Italy. Both have struggled to generate economic growth in the post-GFC era, weighed down by high debt levels and ageing populations.
The data comes from a high quality international source: the Bank for International Settlements (BIS). It is a membership association of central banks and has an objective to promote global financial stability.
The BIS began compiling residential property price data after the 2007–08 Global Financial Crisis, recognising the central role of housing markets in economic resilience, and an acknowledgement that it was an oversight to not have given more focus on residential property prior to the GFC.
See chart below.
Some popular Exchange Traded Funds (ETFs) that invest in India's growth
iShares India ETF (ASX: IIND): Offers exposure to large and mid-sized Indian companies.
BetaShares India Quality ETF (ASX: IIND): Designed to track Indian equities with strong return-on-equity, stable earnings, and low financial leverage.
iShares MSCI India ETF (NYSE: INDA): For Australians with access to US markets; tracks MSCI India Index.
WisdomTree India Earnings ETF (NYSE: EPI): Focuses on profitable Indian companies, weighted by earnings.
Factors driving India residential housing prices
Several interrelated factors have contributed to the substantial growth in India's residential property prices:
Economic Expansion and Urbanization: India's GDP growth, averaging around 6-7% annually over the past decade, has bolstered income levels and urban migration, increasing demand for housing in urban centers .
Demographic Trends: A young population with a growing middle class has led to increased household formation and homeownership aspirations, fueling demand in the residential sector.
Government Initiatives: Policies such as the Pradhan Mantri Awas Yojana (PMAY) and tax incentives for first-time homebuyers have stimulated demand, particularly in affordable housing segments.
Regulatory Reforms: The implementation of the Real Estate (Regulation and Development) Act (RERA) in 2016 enhanced transparency and investor confidence, encouraging greater participation in the housing market.
Infrastructure Development: Investments in transportation and urban infrastructure have improved connectivity and livability in peripheral urban areas, making them attractive for residential development.
Supply Constraints: In major metropolitan areas, limited land availability and regulatory hurdles have constrained new housing supply, exerting upward pressure on prices.
Inflation and Construction Costs: Rising costs of construction materials and labor have contributed to higher property prices, as developers pass on increased expenses to buyers.
Motivation for BIS publish residential property prices
"Reflecting the importance of these indicators for dealing with financial stability issues, the BIS disseminates statistics on property prices for a wide range of countries. This data collection has been reinforced since the 2007/08 financial crisis, not least in the context of the Data Gaps Initiative endorsed by the G-20.
Moreover a growing attention is being paid to the long-term trends in property prices, which are an important element in determining the evolution of financial cycles across countries." (See Bruon Tissot, at this link)