Over the past year and this year until relatively recently housing prices were at dizzying heights in most countries of the world and, above all, in developed economy. The force that drove them into the stratosphere was nothing less than a pandemic, which increased the demand for spaces that could combine family life as well as distant work. However, the situation changed, and the decisive factor was the offensive. rise in interest rates in all major economies.

According to a related CNN report, the increase in interest rates has pushed the cost of borrowing to a level that hasn’t been seen in more than a decade. So they raise mortgage rates and mortgage payments and inevitably make buying a home much more expensive and possibly unaffordable. An illustrative example is the US market, where mortgage interest rates for the first time since 2002 reached 7%, while a year ago they were only 3%. As for the EU. and the UK, mortgage rates have more than doubled from last year and are scaring away potential buyers. Mortgage rates have nearly doubled in 25 major cities around the world, according to UBS. The problem is more serious in countries where a large percentage of mortgages have variable interest rates, such as Sweden and Australia. In these countries, the hit from higher interest rates will be stronger and could trigger a surge in home sales, leading to faster price declines. And all of this is happening at a time when inflation is eroding household incomes and, in other circumstances, potential buyers.

Most markets expect prices to drop by 15-20%.

Thus, house prices have already entered a downward spiral from Canada to China, and their decline may herald a broader market decline after the global financial crisis. House prices are already falling in more than half of developed countries, including the UK, Germany, Sweden, Australia and Canada, according to Oxford Economics. In all these countries, prices fell by about 7% between February and August. A related CNN report quotes Adam Slater, an economist at Oxford Economics, who stressed that the real estate market is the most worrying since 2007-2008, with most markets expecting prices to fall by as much as 15%. up to 20%.

House prices are also falling in the US after skyrocketing during the pandemic to their biggest rise since the 1970s. Economists at Goldman Sachs predict they will see a 5-10% decline by March 2024 from the high levels recorded in June. Enrique Martínez Garcia, a Federal Reserve Economist in Dallas, recently expressed a more pessimistic assessment that US house prices are about to fall by 20%. As for the world’s second-largest economy, China, which has been suffering from a deep housing crisis for several months now, house prices are in free fall, having fallen by 43% this year.

And, of course, at the same time, home sales are also falling, as banks are now very cautious in lending, and potential home buyers are postponing purchases, fearing a further increase in the cost of credit and a further deterioration in the economic situation. In the UK, for example, according to official data, in September home sales fell by 32% compared to the same period last year. Also, a survey conducted in October showed that indications of interest from potential buyers have fallen for the sixth month in a row and are at their lowest level since 2008, except for the first months of 2020, when the market was closed due to the pandemic. . Also in the US, old home sales were down 28% in October compared to the same period last year for the ninth month in a row.