Some property markets set to tumble as global frenzy wanes – Reuters poll

BENGALURU/LONDON, June 1 (Reuters) – The global property market frenzy that accelerated during the pandemic as people rushed to buy more living space is likely to end as interest rates rise and that house price inflation is expected to fall, according to Reuters surveys of market experts have shown.

Huge price increases of up to 50% over the past few years could be coming to an end, turning into modest declines in 2023 in some countries, according to analysts covering nine key global property markets.

But they also say any drop won’t make housing more affordable, especially for first-time buyers, just as the cost of basic living soars and mortgage rates rise – for the first time in the life of many young people.

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“There is definitely a slowdown. So the pace of growth is slowing down all over the place … (and) it’s likely that a number of markets will see prices fall,” said Liam Bailey, global head of research at Knight Frank.

“The question really is whether there is a risk of some sort of crash scenario in certain markets.”

For now, most real estate experts do not even expect a 10% correction in house prices, but stick to the idea that real estate inflation will slow considerably, in most case at a rate below the current rate of increase in consumer prices.

With wages unlikely to match any of these inflation trends anytime soon, analysts unusually agree that basic affordability will be hit over the next few years due to record oil prices. real estate and rising interest rates.

A more than two-thirds majority of analysts, or 83 out of 119, who responded to an additional question, said affordability for first-time buyers will deteriorate or deteriorate significantly over the next two years. The other 36 said it would get better.

Even in real estate markets like India and Dubai – which have avoided panic buying and the high double-digit annual price appreciation seen at the height of the pandemic in markets like the United States, Canada and India. Australia – analysts still agree affordability will deteriorate. NZ/HOUSES

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Part of that has to do with the cost of building new homes, which almost universally aren’t being built fast enough to keep up with demand.

Soaring costs from supply chain disruptions faced by all businesses around the world are expected to be passed on to first-time buyers, the same way consumers pay more for everything they buy.

“The same inflation challenges…particularly in the construction market, and supply chain issues, which continue to plague…developers and homebuilders…are by no means being alleviated,” he said. Adam Challis, Executive Director of Research. and strategy for EMEA at JLL.

“In fact, in the short term, it’s very likely to get worse as people return to cities…and become much more excited about their city life choices.”

Indeed, while analysts are generally reluctant to predict the thinking behind consumer behavior, it was the urge for people to move as they were hit by COVID-19 lockdowns that drove them to bid higher. for a property. Very few expected this to happen.

Going forward, there seems little reason to predict that existing homeowners, who dispose of the equity in their property due to soaring prices, will be much more reluctant to act on the desire to return to city living.

This leaves first-time buyers, who have been struggling to find a down payment for a property for most of a generation, worse off with each passing year. This can hold even if prices fall.

“Your purchase price may be reduced…but in reality, the cost of servicing a loan may not decrease with that price,” Knight Frank’s Bailey added.

In most countries, entire sections of the population, especially young people, have resigned themselves to renting rather than owning. But the housing shortage has also driven up rents everywhere.

Asked what would happen to affordability in the home rental market over the next two years, more than 80% of analysts, or 82 out of 99, said it would get worse. The others said it would get better.

(For more stories from Reuters Quarterly Housing Market Surveys:)

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Reporting by Hari Kishan; Additional reporting and polling 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; Editing by David Holmes

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