Curtains stretch on rising global house prices as interest rates rise: poll
A surge in global property prices is coming to an end as interest rates rise along with the cost of living, according to Reuters polls of housing analysts, who said prices were expected to fall by double digits over several key markets to become affordable.
The ultra-low interest rates and strong demand for remote workers that helped house prices in most major economies outpace not only real wages but also returns in their respective stock markets were now coming to a head. end.
What wasn’t over yet was the rise in consumer inflation, which is above the ranges targeted by most central banks and, in several cases, to multi-decade highs, paving the way for more rate hikes to come in the coming months.
That doesn’t bode well for a sector that’s sensitive to higher interest rates at a time when hordes of new homeowners have been buying homes at the height of a years-long housing boom.
“We have already seen significant changes in mortgage rates from the record high rates of about a year ago … (which) will start to bite households,” said Adam Challis, executive director of research and strategy. for EMEA at JLL.
Reuters polls conducted from August 12 to September 2 of more than 100 housing strategists showed house prices in nearly all nine major housing markets will slow over the next two years more than forecast three months ago. .
While only India and Dubai were expected to post marginal gains, those median estimates were almost identical to those in the May poll.
Despite this tempered outlook, a collapse in house prices was not a view shared by most analysts, as strong labor markets in the developed world were expected to keep delinquency rates from rising.
But most analysts said prices were already so high that even the low single-digit rises projected from here, or in some cases outright falls, weren’t enough to make them affordable.
Supply is not improving either, as housing construction is not expected to keep up with demand.
“Affordability has deteriorated and it would take quite a significant price adjustment to somehow get back to the affordability metrics we were at six months ago,” said Liam Bailey, global head of research at Knight Frank. .
Bailey said the most likely short-term outlook for property markets is for turnover to slow to a trickle as sellers are reluctant to admit the market is down and they need to cut their asking prices.
GRAPHIC: Reuters Poll – Global Housing Markets (https://fingfx.thomsonreuters.com/gfx/polling/gdpzyxwwdvw/Reuters%20Poll%20-%20Global%20housing%20markets.PNG)
But even when the price decline kicks in in most markets, as expected next year, analysts expect only a small dent in the rise in average prices over the past few years.
Where housing was deemed expensive, analysts said prices needed to fall at or near double digits to become affordable.
Canada, Australia and New Zealand, the three most overvalued markets according to the survey, where average house prices have risen 45%, 35% and 40% during the pandemic, are due to fall by 17, 5%, 17.5% and 20%, respectively, to return to an affordable price. [CA/HOMES] [AU/HOMES]
House prices in the UK need to fall by 8.5% to become affordable, according to the survey, the least among developed countries. [GB/HOMES]
In Germany and the United States, where rates are now rising sharply, those figures were 15% and 10%. [US/HOMES]
James Knightley, chief international economist at ING, noted of the US market that “with borrowing costs having almost doubled, we are seeing demand fall sharply in terms of mortgage applications for buying a home just when the supply is really increasing”.
“It’s a recipe for brutal corrections in several old ‘hot spots,'” he said.
(For more stories from Reuters Quarterly Housing Market Surveys:)
(Reporting by Hari Kishan; additional reporting and polling by Jonathan Cable, Indradip Ghosh, Prerana Bhat, Vijayalakshmi Srinivasan, Milounee Purohit, Devayani Sathyan, Vivek Mishra, Arsh Mogre, Anant Chandak and Susobhan Sarkar; Editing by Ross Finley and Bernadette Baum)
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)