Global home prices set for a gentle climb
BENGALURU — Home prices in most major property markets will rise modestly this year and next, according to a Reuters poll of housing specialists, who expected the shortage of affordable homes to persist for at least another two to three years.
The Feb. 15 to March 4 survey of more than 100 experts is the latest sign a brief and mild correction following double-digit percentage price rises during the pandemic is well in the past for nearly all of the nine property markets covered.
Global central banks’ attempts to tamp down inflation through interest rates hikes pushed mortgage rates sharply higher, making existing homeowners who locked in lower rates during the pandemic reluctant to list their properties for sale.
This situation has been particularly acute in the United States, where a 30-year mortgage is common, but it has also encouraged those on attractive fixed rates elsewhere to sit still and wait for rates to fall.
While mortgage costs have dipped over the past couple of months as most forecasters expect top central banks to cut interest rates this year, none expect borrowing costs to drop to pre-pandemic levels anytime soon.
“In so many markets ... supply has been quite constrained. You’ve had quite limited good supply because people are on low mortgage deals, they don’t really want to bring properties to the market and lose those deals,” said Liam Bailey, global head of research at Knight Frank. “The expectation rates are going to fall is now kind of baked in to where people think the market is going to go this year and if rates don’t fall, then we have a problem.”
A quick analysis of median forecasts covering nine major property markets — U.S., U.K., Canada, Germany, Australia, New Zealand, India, China and Dubai — shows how closely a housing market’s performance is linked to the economic outlook.
Of all the housing markets surveyed, prices were expected to fall only in Germany and China this year — both countries are battling an economic slowdown.
Home prices rose at least 20 per cent and as much as 50 per cent during the pandemic in many of these markets but fell only a fraction from those peaks last year. That has excluded many aspiring homebuyers from the market, with larger proportions of turnover in recent years driven by demand for luxury housing.
Economists in separate Reuters surveys have consistently forecast major central banks will start cutting rates roughly around the middle of the year, with the greater risk the first rate cut would come later than forecast rather than earlier.