Estate agents’ sale and rental signs are seen attached to railings outside an apartment building in south London, Britain September 23, 2021. REUTERS / Hannah McKay

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BENGALURU, Dec. 16 (Reuters) – The relentless rise in house prices will ease, but not stop, in most major real estate markets next year, a prospect that experts interviewed by Reuters say will not end. would only worsen affordability as interest rates would also increase.

Almost three-quarters of respondents polled in recent weeks, 74 out of 103 covering eight major global markets, said they expected housing to be even more expensive and less affordable for many in the next two to next three years.

People who already had trouble setting up a down payment will be less able to secure their first home as existing homeowners with heaps of money saved during the pandemic easily outbid them.

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“The greatest risk is really with the younger generations who will not be able to raise the required deposits. Yes, households have saved considerably during the pandemic, but for those without significant equity, the prices have … d ‘between them,’ said Liam Bailey, Global Head of Research at Knight Frank.

Charts from a Reuters poll on the affordability of housing markets

Years of record interest rates and a chronic shortage of affordable housing had already propelled house prices in most major real estate markets to mind-boggling levels before the pandemic.

This price increase was exacerbated when sections of the labor force who were well-off, owned homes and could work remotely during pandemic-related closures began to seek more space, often outside of cities.

Indeed, most of the major real estate markets have outperformed not only their respective economies, but also the optimistic expectations of real estate market analysts.

In five of those markets – the United States, Britain, Australia, Canada and Dubai – house prices have risen about twice as much as rate analysts predicted earlier this year.

Even with this outperformance, only one in 111 analysts who have provided house price forecasts in eight markets expects them to drop next year.

For 2023, just over 10% of those polled predicted modest declines, affecting only Australia, New Zealand and Canada, three of the most expensive real estate markets in the world.

This frantic pace of house price appreciation – in some cases well in double digits this year – is expected to halve in all markets. But in most areas, that would still be much higher than the average salary increases.

“As a result of traditional measures, housing markets have become much less affordable over the past two years. Yes, everything is fine right now because interest rates are so low. But if interest rates go up by significantly, then we’ll have a problem, ”added Knight Frank’s Bailey.

With consumer price inflation now at decades-long highs in the United States and Britain, interest rates are sure to rise from next year’s all-time lows. The only thing that is not clear is by how much they will increase during the year and until 2023.

Reuters survey chart on outlook for global real estate markets

When asked what would have the most impact on prices in the housing market next year, 83 of 106 respondents chose higher interest rates (46) or supply constraints ( 37).

Five said they wanted more living space, three said lower immigration and two said higher inflation. The other nine gave other factors.

One challenge likely to linger next year is the shortage of building materials brought on by the pandemic, choking global trade.

It will do nothing to accelerate the already slow pace of affordable housing construction.

“Some of the demand for home ownership is cooling down a bit, although interest rates are still low, as prices have gotten so high and there isn’t enough homes on the market to buy.” said Geraldine Guichardo, Global Manager. from the Research, Hospitality and Housing Sector at JLL.

Guichardo is more optimistic about the three to five year horizon, where she sees a little more balance returning to the market as developers build more.

“But due to construction costs (and) supply chain issues, the implementation of these projects will be slower,” she said.

(Other stories from the Reuters Global Housing Survey:)

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Report by Hari Kishan in BENGALURU; Additional reports and surveys by correspondents in BENGALURU and LONDON; Editing by Ross Finley and Bernadette Baum

Our standards: Thomson Reuters Trust Principles.


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