As house prices in Dubai continued to slide, prices in China and Hong Kong diverged, according to Knight Frank.

Dubai recorded the world's sharpest fall in house prices in the year to June, according to Knight Frank's global house price index.

Mainstream residential prices in Dubai fell 12 per cent year-on-year as weaker demand, a strong US dollar and ongoing cooling measures brought down sales volumes, the firm said. Compared to the first quarter of the year, house prices in the city were down 2.8 per cent.

Global house price growth, which ticked along at only 0.1 per cent over the year, was held back by lingering concerns over the eurozone economy, jitters in global stock markets and anticipation of a US Federal Reserve rate hike, according to Knight Frank.

Of the 56 housing markets tracked, 27 per cent recorded an annual fall in prices, constituting the index's weakest rate of growth since the final quarter of 2011. 

While property prices in China dipped 5.7 per cent year-on-year, Hong Kong dominated global house price growth worldwide, rising 20.7 per cent despite policymakers' stringent cooling measures. Hot on its heels was Turkey, with an annual growth rate of 18.5 per cent, followed by Estonia with 13.4 per cent.

“Increasing liquidity and the flow of wealthy mainland Chinese investors into Hong Kong’s residential sector meant the number of new homes sold in the first half of 2015 exceeded 8,700,” said Kate Everett-Allen of Knight Frank.

“The recent volatility in the Chinese stock market has underlined the fragility of the eurozone’s recovery and has pushed the likelihood of a rate rise by the US Federal Reserve further back – good news for homeowners in the US (and beyond) but bad news for corporate balance sheets.”