A sold sign hangs in front of a Brighton, New York house on Tuesday, February 21, 2023. (PHOTO / AP)
BENGALURU – Home prices in several major markets will extend their decline this year, according to a global Reuters poll of property analysts who either predicted slightly steeper drops or kept their view steady from a survey three months ago.
Even greater drops may be in the offing, since the forecasts were collected before the Federal Reserve this week indicated that US interest rates would likely climb higher and stay elevated for longer than previously thought.
House prices in Canada and New Zealand, which began to fall last year, were forecast to register a peak-to-trough drop of at least 20 percent, the poll showed
Rising mortgage rates as central banks lift benchmark borrowing costs to curb inflation, and a historic house price boom during the COVID pandemic have pushed home ownership closer to impossible for many prospective first-time buyers.
That in turn has pushed up rents sharply in most markets, leaving the overall cost of housing much more expensive in just the past few years.
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Predicted drops in house prices in the US, Canada, Britain, Germany, Australia and New Zealand will come off price surges of as much as 50 percent since the start of the pandemic in 2020.
Indeed, 50 of the 96 analysts in the polls, taken from Feb 15 to March 8, said affordability would worsen in the coming year. They included nine who said it would do so significantly.
"Those markets that saw the strongest growth during the pandemic, so places like New Zealand, Canada, the Nordic markets, are probably likely to be most heavily affected," said Kate Everett-Allen, head of international global residential research at Knight Frank.
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House prices in Canada and New Zealand, which began to fall last year, were forecast to register a peak-to-trough drop of at least 20 percent, the poll showed.
Both countries have a considerably high household debt-to-income ratios.
Double-digit falls from recent peaks were also predicted for Australia (16.0 percent), Germany (11.5 percent) and the US (10.0 percent). British home prices were expected to fall 8.0 percent.
Among the most commonly cited reasons for house prices to remain elevated were crimped supply, made worse during the pandemic, when construction activity came to a near-halt, and ever-rising demand.
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"A slowdown in new housing construction and (a) drop in building permits are expected to deepen housing shortages in many countries across the world, with population growth continuing to outpace growth in new housing supply," said analysts at JLL.
"A divergence in construction output is anticipated in 2023 with most markets seeing a fall in supply."
While India's housing market will remain resilient despite rising interest rates, home prices in Dubai were also predicted to rise steadily.