In 2012, global home prices are expected to fall, with Asia's downturn having a significant impact.

According to the new Global House Price Index (GHPI) from London-based Knight Frank, which monitors the performance of conventional house prices worldwide, prices rose by just 0.5 percent in 2011 and fell by 0.3 percent in the fourth quarter. Buy Apartments in The Pearl | Property Hunter

The index's performance in the fourth quarter was its worst since the second quarter of 2009. This means that a global return to substantial house price growth is still a long way off.

There will be no turnaround until the difference between house prices and two of their main determinants - incomes and rents - narrows and the excess supply of new homes constructed in many areas prior to 2008 is absorbed.

Prices dropped in 60 percent of the countries represented by the index in the fourth quarter of 2011. If this pattern continues, the overall GHPI could easily fall into negative territory in 2012, especially if the Asian slowdown continues.

In Europe and North America, a combination of global economic uncertainty, low consumer confidence, and strict mortgage lending requirements is dampening growth, while in Asia Pacific, stringent government cooling measures are successfully containing house price inflation.

The slowdown in Asia has had a major effect. China, Hong Kong, and Singapore saw price increases of 42 percent, 21%, and 33%, respectively, in 2007. Growth was -2 percent, 11%, and 5% respectively last year.

China's slowdown has sparked speculation about possible government interference ease, but Nicholas Holt, Knight Frank's Asia-Pacific Research Manager, believes this is impossible. "While local governments are putting more pressure on Beijing to relax some of these measures, the central government appears set to maintain its property-tightening policies, which should keep market sentiment low during 2012."

Away from Europe and Asia, Brazil, a new addition to the index this quarter, is at the top of the rankings, with a price increase of 26% in 2011. Strong population growth, increasing household income, and an expanding mortgage market are all contributing to this remarkable success.

All 12 of the bottom rankings are held by European markets, with Ireland in last place, down 17 percent. Not all European economies, however, are in a state of dormancy. Despite the Eurozone's sovereign debt crisis, Estonia, Slovenia, Iceland, Norway, Switzerland, and Germany achieved annual growth rates of over 5%.

The index demonstrates that global housing market output is far from consistent. Although there is reason for cautious optimism in some areas, the overall trend for 2012 is unlikely to be optimistic.