Global housing markets ensnared by pandemic’s high unemployment
The outlook for major global housing markets looks subdued, with high unemployment from the coronavirus pandemic and lockdowns and low immigration the biggest hurdles over the coming year, according to a majority of analysts polled by Reuters.
The coronavirus has killed more than 480,000 people worldwide, infected about 9.3 million and left many millions jobless. It has also pushed the global economy into a deep recession with the rebound expected to be slow and long as the pandemic still spreads in stages.
That comes despite an unprecedented amount of fiscal and monetary stimulus, sparking a rally in stock markets from late-march troughs, along with steady reopenings of many economies from lockdown.
While average home prices in a few countries polled were forecast to rise this year or next or both, fears of a prolonged drop in activity increased in the June 9-24 global poll of more than 100 property market experts compared with just three months ago.
With several risks still at play, house prices in Australia, India, Dubai, Britain, Canada and the United States were forecast to fall this year and next under a worstcase scenario.
“Our general view is that prices across most major markets will fall, probably around 5 per cent ... and in some it could be more significant,” said Liam Bailey, global head of research at Knight Frank in London.
“The risks are to the downside. The big thing that we don’t know is the potential for a second outbreak and lockdown. And if we get another significant lockdown, then there is every chance that prices would fall again.”
The U.S. housing market, at the epicentre of the previous financial crisis that led to a global recession, was expected to remain a bright spot and defy the economic downturn, supported by record low mortgage rates and limited supply.
While the availability of affordable homes has been a chronic problem there for several years, the main risk is unemployment, which has jumped from record lows to record highs within a couple of months and is expected to remain well above PRE-COVID levels until at least 2022.
High joblessness is the biggest hurdle housing markets will face over the coming year, according to two-thirds of more than 100 analysts across the countries surveyed. More than 10 per cent said lower immigration will dampen housing markets.
“Rising unemployment and the risk of redundancies is likely to have a negative impact on the housing market over the coming months. Many people will choose to put off any major financial decisions, including buying or selling a house, until they are clearer on their income security and the economic outlook has improved,” said Jamie Durham, economist at PWC in London.
“The impact on the housing market is likely to be felt disproportionately in areas with large hospitality and tourism sectors, which have been most affected by the virus.”
More than 80 per cent of nearly 100 respondents said the recovery to PRE-COVID-19 levels would be “gradual,” or “slow and long.” The rest said it will be quick.
In Canada, house prices were expected to rise at a much slower pace than predicted three months ago and fall next year, with high household debt a real challenge.