The global housing market is showing signs of a significant bounce-back, according to data from the Financial Times. After a period that saw the most substantial property downturn in a decade, data and analyses now suggest we’re at a pivotal turning point.
A Global Rebound
The latest analysis, drawing on data from the Organisation for Economic Co-operation and Development (OECD), highlights a promising trend: house prices across 37 industrialised nations have increased by 2.1% in the third quarter of 2023 compared to the previous quarter. This shift is a notable recovery from what was nearly a standstill at the beginning of the year. Even more encouraging is the decrease in the number of countries reporting declines in house prices – dropping from more than half to just about a third.
What’s Behind the Recovery?
Several factors are contributing to this turnaround. Firstly, the sharp interest rate hikes by central banks across numerous economies to combat inflation had initially dampened housing prices. However, with the expectation that central banks might ease borrowing costs, mortgage rates have started to decline, helping to stabilise the housing market. Additionally, a persistent shortage of properties for sale has supported house valuations.
Regional Insights
While the overall trend is positive, it’s not uniform across all countries. Economies with larger rental markets, like Germany, Denmark, and Sweden, might still see some price drops. However, the consensus among economists is that the worst is likely over even for these markets. In contrast, countries like the US, Australia, and New Zealand are witnessing growth or stabilisation in house prices, thanks in part to economic resilience, migration, and restrictive planning permissions keeping supply tight.
Mortgage Rates and Their Impact
For households, the landscape of mortgage costs is mixed. In places like the UK and the US, mortgage rates have seen a slight increase but remain significantly lower than their peak in 2023. This situation suggests that while borrowers may face higher costs as fixed-rate deals expire, many can secure better terms than were available last year.
Spotlight on Economies
The US stands out with a robust 5.2% increase in nominal house prices, buoyed by strong economic and job growth. On the flip side, Germany experienced a steep 10.2% decline, the sharpest among EU economies, influenced by economic challenges and a significant rental market.
Australia and New Zealand are back on the growth path, and even the European Union saw a nominal increase in house prices, indicating a potential easing of the downturn experienced at the start of the year.
Looking Ahead
Experts like Sylvain Broyer, chief economist of EMEA at S&P Global Ratings, believe that while the correction in housing prices in Europe isn’t entirely over, the worst is likely behind us. The anticipation is for a moderate adjustment rather than a steep decline. This optimism is echoed in revised forecasts from Fitch, which now predict milder contractions in markets like the US and the UK than previously thought.
While the news is generally positive across the OECD countries, the scenario outside this group, particularly in China, remains grim. The Chinese housing market is expected to face further declines, with investment demand significantly reduced.