As the rates of loans keep climbing along with the cost of living, the boom in home prices globally is coming to an end. To become affordable, house prices had to drop by double digits in several important markets. In most major countries, house prices increased faster than actual salaries and returns on their individual stock markets because of historically cheap mortgage rates and huge demand for remote workers.
Notably, the real estate market value in countries such as Canada, Australia, the UK, the US, Germany and New Zealand, which are the most overvalued markets, has seen a dramatic increase in all these countries except the UK from 2017 to 2022, according to GlobalData.
The increase in consumer inflation, which is higher than the range expected by most central banks, and in some cases at multi-decade high, is ongoing, opening the door for additional rate hikes in the coming months. This is not encouraging for a sector that is vulnerable to increasing interest rates at a time when thousands of new homeowners have been purchasing homes during the peak of a multi-year housing boom.
Adam Challis, executive director of research and strategy for EMEA at JLL, stated: “We’ve already seen major changes in mortgage rates, of course, creeping up from the record low rates of a year or so ago...(that) are going to impact homeowners.”
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