Tracking the slowdown: early adjusters, bullet dodgers and slow movers
Your international property and economics update tracking, analysing and forecasting trends from around the world.
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The slowdown
The global housing market slowdown is far from uniform.
A recent article by The Economist split the world’s advanced economies into three camps:
1) Early Adjusters: Australia, Canada, New Zealand and Sweden
These countries saw house prices soar during the pandemic as buyers took advantage of cheap credit, with many households adopting variable-rate mortgage loan terms that have now risen significantly. These markets have seen some of the most extensive price corrections to date.
2) Bullet Dodgers: US, France
The impact of higher mortgage rates has yet to be felt in these markets. After the subprime crisis in 2007, a large proportion of US households switched to fixed rates lasting two to three decades, while France has low household debt and as a result is less exposed to rate hikes.
3) Slow movers: UK and Germany
Housebuilders are sounding the alarm, opting not to build due to weaker demand but as yet neither country has been hit hard in terms of price falls. However, they are unlikely to escape the pain.
Push and Pull
The pandemic sparked a paradox; the wealthy are seeking more global mobility at a time when policymakers are lifting their respective drawbridges.
As we highlighted in The Wealth Report 2023, 13% of ultra-high-worth individuals (UHNWIs) plan to apply for a second passport or new citizenship in 2023, a figure that rises to 16% amongst UHNWIs in Asia.
Last week, research by a Norwegian newspaper revealed that more than 30 Norwegian billionaires and multi-millionaires have moved abroad, after the centre-left government increased the country’s wealth tax marginally to 1.1%. The newspaper estimates the tally exceeded the total number of super-rich individuals who had left the country in the preceding 13 years.
But the options open to the global wealthy are shrinking. Visa initiatives are either being shelved - the UK closed its Tier 1 Investor Visa in 2022 - and this year Portugal and Ireland have halted new applications for their Golden Visa schemes following pressure from the European Union.
Low taxes, an attractive lifestyle and good schooling are at the top of the wealthy’s shopping lists, a combination that has propelled Italy into the limelight. The introduction of the country’s Flat Tax initiative in 2017 sees it now competing alongside traditional stalwarts such as Switzerland and Monaco.
Contagion contained?
Last month’s collapse of Silicon Valley Bank (SVB), Credit Suisse’s emergency takeover by UBS, and the recapitalisation of First Republic Bank were expected to simultaneously spark a banking crisis and stay the rate-hiking hand of central banks around the world.
But the Federal Reserve and the Bank of England failed to stick to the narrative, deeming inflation still too high and pressed ahead with their rate rises.
But the US housing market surprised on the upside. Since SVB’s collapse on 10th March, 30-year mortgage rates shifted lower from 6.17 to 5.70, according to Fannie Mae, and mortgage applications were up 5.3% in the first week of April, according to the Mortgage Bankers Association.
Lenders will tighten further in the coming months, but most analysts are not adjusting their 2023 forecasts for prices or sales in the US.
In other news…
Hong Kong’s government will cut taxes for family offices (Bloomberg), Wall Street bonuses fell 26% in 2022 (CNN), and Germany, the US and Sweden offer the most powerful passports (International Investment)
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