BENGALURU/LONDON, June 1 (Reuters) – Market experts polled by Reuters said.
The huge price rises of up to 50% over the past few years may be coming to an end, with some countries set to turn to small declines in 2023, according to analysts covering nine of the world’s major real estate markets.
But they also said any decline would not make housing more affordable, especially for first-time buyers, just as the cost of basic living has soared and mortgage rates have risen – for the first time in many young people’s lives .
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Liam Bailey, Knight Frank’s head of global research, said: “There will definitely be a slowdown. So growth is slowing almost everywhere … (and) there could be price declines in many markets.”
“The question is really whether there is a risk of some kind of crash in certain markets.”
Right now, most real estate experts aren’t even predicting a 10% correction in house prices, insisting instead that housing inflation will slow sharply, in most cases below the pace at which consumer prices are currently rising.
With wages unlikely to match any of these inflationary trends anytime soon, analysts have reached an unusually strong consensus on the hit to basic affordability from record-high house prices and rising interest rates in the coming years.
A majority of analysts, more than two-thirds, or 83 of 119, answered another question, saying affordability for first-time buyers will deteriorate or deteriorate significantly over the next two years. The remaining 36 said there would be improvement.
Even in housing markets like India and Dubai — which avoided the panic buying and double-digit annual price hikes seen during the height of the pandemic in the U.S., Canada and Australia — analysts still see affordability worsening .New Zealand/Homeland
Part of the reason has to do with the cost of building new homes, which, almost universally, aren’t being built fast enough to keep up with demand.
The soaring costs of supply chain disruptions facing all businesses around the world will be passed on to first-time buyers, just as consumers pay more for everything they buy.
“The same inflation challenges…particularly in the construction market and supply chain woes, continue to plague…developers and homebuilders…without any degree of relief,” said Adam Challis, executive director of research at JLL EMEA and strategy.
“In fact, in the short term, it’s likely to get worse as people return to cities … and become more excited about their urban living options.”
In fact, while analysts are often reluctant to predict the thinking behind consumer behavior, it is the urge to move when people are hit by COVID-19 lockdowns that drives them to bid for properties. Few people expected this to happen.
Going forward, there seems to be little reason to predict that existing homeowners, who have a lot of home equity due to soaring home prices, will be more restrained as they look to return to urban living.
That leaves a worse situation for first-home buyers who have been struggling for most of a generation. This may hold true even if prices fall.
“Your purchase price may be lower … but in reality, the cost of repaying the loan may not actually decrease with that price,” added Knight Frank’s Bailey.
Most people in most countries, especially young people, have given up renting rather than owning. But the housing shortage has also pushed up rents everywhere.
When asked what would happen to affordability in the rental housing market over the next two years, more than 80% of analysts, or 82 out of 99, said it would worsen. The rest said it would improve.
(Additional coverage on Reuters’ quarterly housing market survey:)
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Reporting by Hari Kishan; Additional reporting and opinion polls by Jonathan Cable, Shrutee Sarkar, Indradip Ghosh, Prerana Bhat, Vijayalakshmi Srinivasan, Milounee Purohit, Vivek Mishra, Arsh Mogre, Anant Chandak, Md. Manzer Hussain and Susobhan Sarkar; Edited by David Holmes
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