Is the global housing boom coming to an end?

(Financial World) Is the global property market boom coming to an end?

　　China News Agency, Beijing, November 10th: Question: Is the global property market boom coming to an end?

　　China News Agency reporter Pang Wuji

　　The global housing boom of the past two-plus years appears to be coming to an end.

Since the outbreak of the new crown epidemic, stimulated by the global ultra-loose monetary policy, housing prices in many countries around the world have soared to record highs, and the risk of housing price bubbles has accumulated.

Today, under the double impact of aggressive interest rate hikes by the Federal Reserve and other global economic recessions, the global housing market is rapidly cooling.

　　Oxford Economics described it in a recent report: "Overall, this is the most worrying housing market outlook since 2007-2008, with future house price movements likely to range from moderate declines to sharp declines. tossing back and forth."

　　Kashif Ansari, co-founder and group CEO of Juwai IQI, a real estate technology group with 30,000 brokers in Asia Pacific, Europe and the United States, said in an interview with a reporter from China News Agency that Canada, Australia, New Zealand, etc. Home prices in the United States are expected to lead the decline in the developed country's housing market.

　　Interest rates soar, multi-national property markets turn cold

　　The Oxford Economics report argues that continued surges in mortgage rates in advanced economies threaten to push some housing markets into a sharp recession.

In the future, with the tightening of bank credit standards and the deepening of the economic recession, the downward pressure on house prices will further intensify.

　　British mortgage lender Halifax recently released data showing that UK house prices fell by 0.4% month-on-month in October, following a 0.1% month-on-month drop in September.

The U.S. S&P/Case-Shiller home price index also posted its first monthly decline in July since 2012.

　　South Korea's housing prices, which had previously experienced a "popular housing rush", have fallen for many consecutive months.

In the first half of the year, the number of condos transacted in the country fell 50.6 percent from a year earlier, the lowest level since 2006, according to data released by the Korea Real Estate Council at the end of July.

　　House prices in New Zealand have continued to fall as mortgage rates have risen, and nationally they are down 11 per cent from their November 2021 peak, with steeper falls in Wellington and Auckland, according to a recent Reserve Bank of New Zealand report.

　　It is not difficult to see that the global property market "ebb tide" is directly related to the increase in interest rates.

Taking the United States as an example, the 30-year mortgage interest rate in the United States recently exceeded 7%, the highest level since 2002, while the US mortgage interest rate was only 3.2% less than a year ago.

　　Four countries are most at risk of falling house prices

　　According to Oxford Economics, housing markets in Canada, New Zealand, the Netherlands and Australia are most at risk.

These economies generally saw higher house price growth from the fourth quarter of 2019 to the second quarter of 2022, high property valuations, high levels of debt, and prominent floating-rate debt.

　　Fiona Yang, managing partner of Plus Agency, a well-known real estate company in Sydney, Australia, has already felt the changes in the market.

She told China News Agency that Sydney apartments were the most affected.

Home buyers and sellers alike are daunted by rising interest rates, so fewer listings are entering the market and fewer offers per listing.

“A year ago, our typical property sold for roughly 110 per cent of the listing price, and today resale transactions are averaging around 90 per cent of the asking price.”

　　Tina Mak, a well-known real estate investment consultant in Vancouver, British Columbia, Canada, said in an interview with a reporter from China News Agency that during the epidemic, housing prices in the surrounding areas of Vancouver rose significantly, and large-sized houses in the suburbs were sought after.

However, since this year, many companies have resumed work, and cost pressures such as commuting time and oil prices have emerged. Now the houses outside the city have fallen the most, and have fallen by 20% this year.

　　Analyzing the reasons, Kashif Ansari believes that, first of all, the real estate markets in Canada, Australia, New Zealand and other countries have experienced the largest increases during the epidemic, and the places where the real estate markets have experienced high growth rates are also the most likely to fall when monetary tightening occurs.

Also, unlike most home buyers in the U.S., where mortgages are fixed-rate, a significant portion of mortgages in countries like Canada and Australia are floating-rate, which means homeowners are under pressure from higher interest rates, which in turn is accompanied by rising prices. .

　　Kasif Ansari pointed out that if the proportion of household debt to household disposable income is too high, and several factors are added together, the demand for the local property market will be greatly reduced, which will lead to a double drop in the transaction volume and price of the property market.

　　Will the 2008 subprime mortgage crisis recur?

　　Qashiv Ansari said that the industry generally believes that the 2008 subprime mortgage crisis will not recur.

After the last subprime mortgage crisis, banks were more stringent in reviewing loans when making loans. Data shows that the number of houses confiscated because they could not repay their mortgages did not increase significantly.

　　In addition, he pointed out that the decline in property prices is based on the surge in the past two years. Even if the housing prices in Canada, Australia and New Zealand fell by 20%, they are still higher than before the epidemic.

People's wealth will be discounted compared to during the epidemic, but it is still higher than before the epidemic.

　　Oxford Economics also noted that mortgage debt as a percentage of household income in some major markets is lower than it was before the global financial crisis.

In addition, there is less mortgage debt with floating rates than before the global financial crisis.

That means households face less of an immediate shock from rising mortgage rates.

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