Is the period of high house prices over?

BLOOMBERG HT SEARCH

In the housing sector, whose prices are rising rapidly in the world and in Turkey, rising interest rates on loans, falling incomes and housing construction, which has slowed down due to rising costs, have led to stagnation and even recession. . The sudden slowdown in the real estate sector has made homes purchased at high prices questionable.

Demand weakens in the US

The US is one of the countries where rising interest rates have started to cool the housing market. In the US, the 30-year home loan interest rate hit 5.78% last week and peaked in 2008. Demand weakened after home loan rates showed the sharpest rise in half a century, on average. . Weakening demand, on the other hand, has caused homemakers and existing home sellers to lower prices.

In the week ending May 22, 20% of US home sellers have reduced prices in the past four weeks. That means it’s the highest level seen since October 2019. Indeed, in regions like Boise and Idaho, which were in demand with their relatively lower prices during the epidemic, the rate of sellers who lowered their housing prices in April reaches 41%.

Redfin chief economist Daryl Fairweather; residential sellers; He thinks they are aware that they cannot raise prices like they did during the epidemic, while the buyer’s market is so stuck. In fact, according to Fairweather, prices must fall further for housing demand to take place.

It will drop to 5% next year.

After the price of a single home in the US rose by 18% in 2021, that rate of increase will increase to 10% in 2022, according to Freddie Mac; By 2023, it will decrease to 5%. Indeed, for house prices that have risen so sharply, the loss of momentum at this rate remains quite high. In fact, according to Freddie Mac’s deputy chief economist Len Kiefer, the decrease in the number of homes for sale, those born in the millennium marry in this period and the continuation of the demand for housing with their family establishments will continue, although the price trend in the housing market does not rise as sharply as after the epidemic.

If we look at what is happening in the US housing market in the short term; As a result of the sudden downturn in the housing market, two US real estate companies, Redfin and Compass Inc; They announced last week that they will resign.

House candidates will determine the situation in England

After 2 years of historic increases in England, the momentum of house prices appears to have slowed down a bit. According to Tom Bill, from the London-based real estate consultancy Knight Frank, in the country where the stamp duty exemption was applied for sales of houses up to 500 thousand pounds between 2020 and July 2021, within the scope of pandemic practices, the prices of Housing rose rapidly, disconnected from the economy. Although the Bank of England has raised interest rates five times in recent months, it is expected to continue. According to Tom Bill, these measures could cool the housing market a little for the rest of the year. Improving the supply side and the direction of those looking for can be decisive in the long term.

New housing permits are at their lowest level in two years. Recruitment requests also declined after 8 months in May. Real estate expert Aneisha Beveridge says people are pessimistic about the general economy and that the war in particular has negatively impacted their cost of living.

Although the Bank of England has shelved home loan repayability stress tests from August, it is noted that this situation could create new risks as home seekers turn to targets that are not possible. Interest is still high in internationally known areas like London, but prices are rising faster in secondary cities like Birmingham, Liverpool and Manchester than in the capital.

Tom Bill adds that the UK will always be favored because it is seen as a country with rights, has good schools and respects private property.

Czech Republic: 2nd in the housing bubble survey

The Czech Republic and Hungary stand out in Europe with their high rates of accommodation. Vit Hradil, senior economist at Prague-based investment consultancy Cyrrus, adds to this situation in relation to the country’s overall outlook, adding to rapidly rising inflation and low unemployment rates. The complexity of the process of obtaining the construction permit and the growing interest of those who came to the country from abroad to work in the last period have raised housing prices far above salary increases. According to London-based data provider CEIC; At the end of 2021, there was an annual increase of 26%. Thus, the country with the biggest difference between the average income of ordinary citizens and property prices in the EU was the Czech Republic.

To contain inflation, which reached 16% in May, the Czech Central Bank resorted to a policy of monetary tightening. Interest rates in the country rose to the highest level since 1999. Vit Hradil’s view on the matter is that “despite the increase in interest rates, the expected drop in demand has not materialised”.

Irish citizen Meera Sankar, who works as a visual producer in Prague, was unable to get results with the 3 million Koruna ($130,000) allocated to find a one-bedroom house. He claims that despite doubling that amount, she still hasn’t found a safe, standard home to lay her head. He can’t help but add that with the same budget, he can live in a giant 150 square meter house in Cork, Ireland, or in his father’s hometown of India.

The Czech Republic ranks second in Bloomberg Economics’ housing bubble survey. Lastly, the Czech Republic is followed by its neighbor Hungary, where Prime Minister Orban has increased housing incentives for birth incentives.

20% increase in Hungary in the last quarter of 2021

Housing data in Hungary, according to Eurostat data, prices increased by almost 20% annually in the last quarter of 2021. Due to the war in Ukraine, especially rising energy prices and labor shortages in construction seem to have made the situation even more difficult. The Hungarian central bank also unexpectedly raised interest rates by 50 basis points last week.

Music in New Zealand may end this year

New Zealand house prices rose by a record 30% a year in 2021. But experts expect the “music” to end in 2022. In an example featured on Bloomberg Terminal, a New Zealand family is struggling to sell their apartment. $2 million in New Zealand for the local government for $1.8 million. In particular, the RBNZ, which carried out the biggest interest rate hike in 22 years with a 50 basis point rise in interest rates in April, has turned all the winds in the housing sector. The New Zealand family’s apartment was sold at a very popular auction in the country. Making a statement on the matter, the official said that “every week, the selling price of the apartment is reduced by 100 thousand New Zealand dollars. year, and even a pullback from the peak of 2021 could reach 20%. On the mortgage interest side, last year homeowners used loans at 2.5%, while this year the rate approached 6%. if this increase continues.

Prices in Canada have been falling for two months

Canada; It was one of the countries where housing prices have risen the most since the beginning of the epidemic. Prices began to fall in areas where the housing market was hotter, such as Toronto and Vancouver, which saw a 50% increase in just two years. In April; Housing prices, which experienced their first drop in two years, continued their decline in May as well. The housing market, like the rest of the world, had heated up with the view that the Bank of Canada would raise interest rates, especially in the face of rising inflation. Soaring wages with rising inflation, buyers trying to enter the market when interest rates were low, caused home prices to spike in panic, as has been the case around the world. However, at the point reached, buyers; Fearing that housing prices would fall for two consecutive months, they even went so far as to give up the deposit they had given to buy a house. By the way, interest of 0.25% at the beginning of the year; Although it has reached 1.5% at this point, the fact that prices have become unaffordable for new homebuyers has started to cool the market. While home prices are expected to decline as rising interest rates make it harder to buy homes, the National Bank of Canada expects home prices to drop another 10% in Canada.

Construction statistics slowed in Turkey, price increase continued

In Turkey, the housing sector; The main factors, such as rising production costs, the slowdown in the construction of new homes, the negative interest rate environment, protection against inflation, the exchange rate shock, strong demand, external demand and immigration caused for prices to rise significantly. According to the latest data; The Housing Price Index, which increased by 10.2 percent in April 2022 compared to the previous month, increased by 127.0 percent in nominal terms and 34.9 percent in real terms compared to the same month of the previous year. In Istanbul, the most important city in the sector, the increase is 142%, in the Mediterranean region, where demand has increased with the Russian occupation of Ukraine, Muğla, Aydın and Denizli are the cities with the biggest increase in housing prices with 146 per cent. cent and Antalya with 158 percent. While the unit price per square meter in Turkey was 10,574 TL in April 2022, this figure was 4,200 TL last year. On the other hand, the unit price of an average 100 square meter apartment in Istanbul has increased to 1.7 million TL.

Arrangement Price/rent ratio Price/income ratio Actual price growth (%) Nominal price growth (%) Credit growth (%)
New Zealand 1 156.8 143.9 23.1 27.6 1.5
Czech Republic two 169.7 140.9 20.2 25.8 2.4
Hungary 3 160.5 131.4 11.2 19.5 -0.5
Australia 4 141.5 119.7 21.1 23.7 -3.3
Canada 5 154.9 143 12.2 17.6 -4.7
Portugal 6 156 146.8 9.4 11.6 -two
USA 7 139.2 135.9 11.7 18.7 -2.5
Austria 8 134.1 140.9 11.9 14.9 -1.3
Russia 9 157.6 99.8 11.6 22.8 -1.4
Luxembourg 10 166.5 143.7 8.2 12.1 -5.7
Netherlands 11th 148.8 137.8 7.8 16.7 -3.3
Germany 12 147.6 139.5 7.2 12.2 -0.9
Sweden 13 129.2 116.3 8 11.1 -1.2
Switzerland 14 121.7 121.2 7 8.3 -1.7
England 15 126.8 120.1 6 10.5 -4.1
Chile 16 132.3 124.5 6.9 11.9 -7.8
South Korea 17 113.5 100.4 6.7 9.9 3.1
Japan 18 114.8 109.1 7.4 7.3 1.3
France 19 127.3 112.6 4.5 7.3 -2.3
Spain 20 129.5 124.7 2.2 6.3 -6.4
Poland 21 121.4 108.2 3.4 12.1 -6.4
Greece 22 129.6 103.7 6.4 7.9 -7
Ireland 23 124.6 114.8 7 13.9 -12.6
Colombia 24 121.8 114.1 2.2 7.7 -6.2
Denmark 25 126.4 114.1 0.6 4.1 -6.4
Belgium 26 117.3 108.3 1.4 6 -5.6
Norway 27 122.4 111 4.3 8.1 -13.6
Finland 28 101 101.6 0.7 3.9 -2.3
Italy 29 103 94.7 0.9 4.1 -3.3
South Africa 30 103.6 hundred -2.2 3.4 -7.1

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