Although the rally in the international real estate market slowed down significantly after the repeated increases in lending rates around the world, the prices of of residences they are still above the historical average, according to its analysts International Monetary Fund. As typically stated in a related post on the Fund’s blog, real estate prices in developed economies, including most countries in the European Unionare still 10% to 25% higher than pre-pandemic levels.
In detail, based on the same analysis, the increase in borrowing costs from central banks around the world has very quickly impacted the mortgage markets, putting obstacles in the way of home ownership and those interested property owners. Of course, additional problems are caused by the lack of suitable housing in certain areas. Overall, it’s harder to own a home while home prices and mortgage rates are at such high levels.
In the first half of 2023 the demand for housing in developed economies increased by at least 2% on an annualized basis. During this time, housing costs in some countries such as Australia, Canada and New Zealand fell significantly, possibly because of a price rally that started before the pandemic or because of the large share of variable rate mortgages. By comparison, prices fell by at least 15% in some developed economies, while in emerging economies there was a decline, but less. In any case, always according to IMF economists, house values have not yet returned to pre-pandemic levels and the market still has a way to go to erase the gains of 2021 and 2022. The strongest imprint of high interest rates is expected to be in the household debt service ratio – a measure of their ability to repay debt – in countries where house prices remain inflated and the average time to pay off mortgages is shorter, the analysis said.
