The real estate boom is coming to an end

admin

Home buyers are declining as central banks raise interest rates at their fastest pace in decades. Meanwhile, those who have built up debt from the era of negative interest rates are now facing much higher payments. A sharp cooling in sentiment in such an important sector threatens to worsen the global economic situation, although – according to Bloomberg – the declines of the 2008 financial crisis are still far from. they want to control inflation, but without damaging consumer confidence or causing a deep recession. Markets like Australia and Canada are already struggling with double-digit house price declines, and economists believe the recession is just beginning. Hideaki Hirata of Hosei University, a former economist at the Bank of Japan, believes that we will have to wait a bit longer with the full impact of this year’s aggressive interest rate hikes. The Bloomberg agency is of a similar opinion, which predicts that “in 2023 and 2024 we will witness a synchronized slowdown in the housing market”.

Spain among the most threatened

The impact of rising interest rates on the economic well-being of societies varies considerably from country to country. For example, in the United States, most buyers have opted for 30-year fixed rate loans. Over the last five years, mortgage loans with variable interest rates accounted for an average of about 7 percent. credits granted. Meanwhile, in many European countries it is common for a fixed interest rate to be held only for the first year of the loan and that mortgage loans bear a floating interest rate. This is also the case in Spain. In May last year, Fitch recognized this country as one of the most exposed to changes in the ECB’s monetary policy – both due to the large number of floating-rate loans and the higher average cost of credit in relation to monthly household income.

Growth and then collapse

New Zealand, where real estate prices rose by 30% in 2021 alone, is an example of a pandemic boom and a subsequent crash. The central bank raised interest rates there seven times in the last 10 months, which caused house prices to drop 11% in July. from the maximum reached in November last year. Economists predict a further downward trend and a price reduction of up to 20 percent.
China is also struggling with the growing crisis on the real estate market, related to the wave of insolvencies of developers and borrowers who hold back their mortgage payments. In other countries, a wave of such problems is also starting to spread.
In Sweden, previously one of the hottest markets in Europe, house prices have fallen by around 8% since the spring, with most economists predicting a decline of up to 15%.
Price drops are accelerating in Great Britain. According to Bloomberg’s analysis, home values ​​are falling in nearly half of London’s boroughs. HSBC warned that the country is at “the cusp of a housing recession” and that demand is likely to decline by 20% in 2023. About 1.8 million UK homeowners have to refinance their loans next year. Buyers who bought homes during the tax break introduced in summer 2020 to stimulate the market during the pandemic are most at risk.
In the US, Goldman Sachs estimates that prices will stagnate next year, although signs of declines are already showing in some regions. Retailers are lowering prices in areas where prices have risen during the teleworking pandemic.
Some governments – as in Poland – began to intervene to help those with the mortgage. This is the case, for example, in South Korea, where large resources (about $ 290 million) have been allocated to reduce the percentage of households with floating-rate mortgage loans.

Click to rate this post!
[Total: 0 Average: 0]
Next Post

Zaporizhzhya reconnected to the electricity grid

Zaporizhzhya’s nuclear power plant is now reconnected to the Ukrainian electricity grid, the International Atomic Energy Agency IAEA announces. At the same time, the Czech Republic wants to see a war crimes tribunal after the discovery of mass graves in Izium.Published: September 17, 2022, 9:23 p.mOne of the Zaporizhzhyas four […]
Zaporizhzhya reconnected to the electricity grid

Subscribe US Now