Where next for global housing markets?
Your international property and economics update tracking, analysing and forecasting trends from around the world.
4 minutes to read
1. Global house prices
The world is seeing the most aggressive tightening cycle since the 1980s and new research by Capital Economics show the housing and auto sectors are feeling the impact the most.
Higher interest rates are already weighing on spending in Australia and New Zealand with the US and Canada next in line to feel the pinch according to the economic consultancy firm.
It suggests three months is a long time in housing market economics.
Knight Frank’s two mainstream indices, one tracking prices across 56 countries and territories and the other tracking prices across 150 cities worldwide have yet to see a marked downturn.
It’s likely this anomaly comes down to reporting lags. Reliant on official indices published by central banks and national stats offices, both indices confounded our estimations and displayed relative resilience in the second quarter of 2022. Furthermore, cities performed more strongly, edging ahead of their national counterparts.
It is likely the ebullience of the pandemic years ran into the summer months, but the inflection point will come in Q3 as mounting economic headwinds and deteriorating affordability weigh on buyer sentiment.
2. Housing market cooling measures
Australia is proving an outlier. Since July the new government has doubled fees for foreign buyers and now looks set to do away with an investment visa popular with wealthy Chinese buyers.
Few other policymakers are taking as strong a stance at a time of growing economic uncertainty.
According to The Economist, Australia’s minister for home affairs indicated that the “significant investor visa” (SIV) will be scrapped by the next budget. More than 2,000 wealthy immigrants, many from China, each investing more than
A$5m ($3.4m) are estimated to have gained Australian citizenship via the measure.
A year ago, we expected 2022 to be ‘the year of the cooling measure’ as governments tried to get control of pandemic-induced house price surges, whether via stamp duty hikes, foreign buyer restrictions or measures targeting second homes.
In fact, the spreadsheet Flora Harley and I maintain tracking cooling measures globally has hardly been opened this year. The changing economic climate has stayed the hand of governments globally whilst they adopt a ‘wait-and-see’ approach to determine whether tighter monetary policy will do the job for them.
Liam Bailey, Tom Bill and I discuss this and more on the latest Intelligence Talks podcast which assesses “What’s next for the world’s housing markets?”
3. European mortgage costs
Economists are tipping the Eurozone to be one of the hardest hit regions this winter with a triple whammy of rising energy costs, higher interest rates and the Ukraine crisis on its doorstep.
And whilst we may see a winter of discontent, the impact of higher mortgage rates at least may not be felt immediately.
Data from the European Mortgage Federation shows the proportion of Eurozone households on variable rate mortgages has fallen significantly in the last decade.
The burden of debt is increasing but it may not be felt straight away in some markets where fixed rates dominate household lending. The UK, France and Germany have some of the lowest levels of variable rate lending whilst Poland, Portugal and Greece have some of the highest.
Europe’s second homes market has, as yet failed to get the memo on market slowdowns. Our analysis shows enquiries for second homes remain 35% higher than pre-pandemic levels and the usual August lull failed to materialise this year.
I discussed this and more with my colleague Nicola Christinger and Charlotte Reiss founder of the brand Vivi et Margot when we did a deep dive into the Provence market last week via an Instagram Live.
With summer in the northern hemisphere coming to a close, all eyes are now turning to the Alps. After two disrupted seasons, will this winter finally see both tourists and overseas buyers be given uninterrupted access to the slopes?
We’re keen to hear from those who own or are looking to buy a ski home in our new Ski Property Survey which will help shape our upcoming Ski Report. Do please share your thoughts and enter the prize draw.
In other news…
Evergrande vows to restart all stalled projects by the end of this month (FT), the biggest jump in US rents since 1991 keeps overall inflation high (Bloomberg) and US interest rates top 6% for the first time since 2008 (Reuters)