Hong Kong
Annual increase:20.1%
Uber-rich Mainland Chinese business owners have been flocking to Hong Kong, and it's not just because it's the world's business and trade center. It also has some of the world's most sought-after real estate.
While demand is relatively high, supply is tight, given that this densely populated region spans only about 426 square miles. That explains why prices have risen faster than other country in the world in the past year. It also helps that borrowing costs to pay for these super-expensive homes is at record lows. Since December 2008, the base interest rate has hovered at a two-decade low of 0.5%.
But Hong Kong's government has been trying to quiet the real estate party, as part of its ongoing effort to fight inflation. In November, officials took its toughest steps by imposing an additional transaction fee of up to 15% on properties that are resold within two years. They have also required higher down payments for high-end home purchases.
Latvia
Annual increase:16.9%
Want to become a resident of the European Union? Just buy property in this Baltic State.
During the global recession, Latvia saw the world's largest fall in home prices, dropping an incredible 70%. But the market has bounced back in a big way, partly driven by a fairly new law (effective July 2010) that gives EU residency rights to non-EU citizens who buy property worth at least 70,000 euros (or $93,000) or invest in a business here.
That doesn't mean foreign investors are permitted to work in the rest of Europe. However, property owners can roam freely within Germany, Greece and 23 other countries that make up the EU's Schengen area.
Israel
Annual increase:16.2%
Skip Nantucket. Let's vacation in Israel.
Israel has become one of the hottest real estate markets in the world. From Tel Aviv's beachside high-rise condos to the heart of Jerusalem, much of the demand has been coming from North American and European Jews in search of vacation homes. Similar to many other robust real estate markets, Israel's housing market is fueled by a shortage of properties and record low interest rates.
So far, Israel has dodged a housing market crash like the ones in the U.S. and parts of Europe mostly because it didn't experience the same credit booms in the years leading up to 2008. But that doesn't mean Israel's government isn't worried about it. Officials have been trying to bring the market boom to a soft landing by raising borrowing costs and putting tighter restrictions on some loans.
China
Annual increase:15.3% (based on Beijing and Shanghai prices)
Need somewhere to store your wealth and maybe even make a healthy profit?
Millions of Chinese have been buying up homes with the same enthusiasm once common among U.S. home buyers. With few investment options for many middle class Chinese, residential properties have become a great option to store wealth. Even while the global financial crisis in 2008 gripped many nations, China's housing market was virtually unaffected.
But home prices have arguably reached bubble territory and China's government has been on high alert. Officials have intensified efforts to cool the market -- from raising the minimum down payment for second-home purchases to levying taxes on residences in Shanghai and Chongqing this year. Even while China's central bank hiked interest rates twice this year and raised mortgage rates for multiple home buyers, it remains to be seen where prices will go -- a soft landing, a disastrous crash or perhaps somewhere in between?
Singapore
Annual increase:14%
This island country in Southeast Asia felt the pains of the 2008-2009 global recession, but its $182 billion economy bounced back relatively quickly as Singapore's government flushed the country with capital from the stimulus package.
Not only has business and trade rebounded, but home prices have surged to the point where government officials worry that prices might be rising too much. Singapore has been trying to curb speculative buyers -- earlier this year, it raised down payment requirements for second mortgages and extended the period homeowners must hold properties to avoid a sales tax.
Austria
Annual increase:9.9%
This cultural and financial hot spot underwent a sharp recession in 2009 during the global financial crisis. But Austria's economy bounced back relatively quickly by 2010. With unemployment at 4.8%, Austria's job market is nowhere near as grim as in some parts of Europe.
And with the housing market as a reflection of the overall economy, home prices have rebounded, partly driven by demand from institutional investors.
France
Annual increase:9.5%
Paris has long been known for stylish people, delicious cuisine and universal health care. And let's not forget some of the priciest real estate in the world.
Home prices have surged in France, thanks largely to the thriving real estate market in Paris amid ultra-low interest rates. While prices across France on average rose only 1.5% in 2010, prices in the Paris area skyrocketed 15.7% according to the national residential real-estate broker's lobby FNAIM.
But prices could soften some in the future. Last month, Bank of France Governor Christian Noyer warned prices could be in for a correction as euro area interest rates rise, making the cost of borrowing higher.
India
Annual increase:8.9%
In this rapidly growing economy, it seems there may never be enough homes to house the expanding population.
Incomes here have risen considerably in recent years. And home prices, especially in Mumbai, have surged as demand for residential properties outpace supply. But India's government has been worried that the market might be too hot. In January, its central bank raised the benchmark interest rate to a two-year high.
It remains to be seen how record prices and high interest rates could discourage buyers and possibly compel developers to cut their asking price.
Poland
Annual increase:8.1%
If overall GDP is any reflection of the overall housing market, then it may be no surprise that prices in Poland have been rising.
During the economic downturn, it was the only country in the European Union (which it joined in 2004) that maintained positive economic growth, although the country on average was still poorer than other EU countries. As The Economist suggests, this was partly coincidental. Poland's government kept the property boom in check and banks operated under tough regulations that restrained borrowing, primarily in foreign currency.
In 2010, as home prices surged, Poland's economic growth rate more than doubled over the previous year to 3.8%. Much of the growth had to do with companies rebuilding inventory, but it was also driven by higher consumer demand as employment and wages improved.
Denmark
Annual increase:7.8%
Though parts of Europe are dealing with growing debt problems, Denmark's fiscal position has remained among the strongest in the European Union.
The country experienced a housing market boom in the years leading up to the global financial crisis, but that bubble burst all too suddenly with prices dropping steeply in 2008 and 2009.
Denmark's economy has recovered modestly, thanks partly to government stimulus. And with that, home prices have rebounded. But maybe not for long. The European Central Bank earlier this month raised interest rates for the first time in nearly three years, which could deter some homebuyers who might scoff at the thought of higher borrowing costs.
Pricing data is from Knight Frank Global House Price Index
