The slump in global house prices has largely ended recently, with average home prices in major markets expected to decline less than forecasts at the start of the year and rise in 2024, a Reuters poll of property analysts showed.
The double-digit declines in prices that analysts predicted earlier this year on rising mortgage rates have not fully materialized as higher household savings, tight supply and rising immigration have limited declines.
The significantly higher mortgage rates resulting from more than a year of rate hikes by key central banks have not affected everyone.
Many homeowners who took out cheap mortgages during the long period of near-zero interest rates, especially those in the US, have decided to stay in their homes. This limits supply and activity in the housing market.
But it's bad news for first-home buyers, who have been locked out of the market for years because of tight supply and were forced out of it by strong price growth during the COVID-19 pandemic, when existing homeowners bid higher than their offers and pushed home prices to double-digit annual growth.
The results of the new survey, especially for the economies with the fastest house price growth in recent years such as the US, Canada, New Zealand and Australia, cast doubt on the assumption that the next move by most central banks will be to cut interest rates.
Much of the optimism surrounding the unexpected early stabilization of these markets actually stems from the assumption that interest rates have peaked and that as early as the first half of next year they will start to go down again.
"There has probably been a bit of over-optimistic thinking in the last two months about the implications of a peak rate scenario. I think we haven't felt the full impact of higher interest rates. Because of fixed rate mortgages, many property owners are protected from the consequences," said Liam Bailey, head of research at consultancy Knight Frank.
“I think we actually have very low supply and housing volumes in most markets because of the disruptions to business and supply chains caused by COVID... We also have quite strong demand in most western markets. The fundamental element is that strong demand meets weak supply," he adds.
Housing demand is outstripping supply, and average rents are expected to rise and rental affordability to deteriorate.
Nearly two-thirds of analysts, 65 of 101 who responded to a follow-up question, said rental affordability will worsen next year. The remaining 36 are of the opinion that it will improve.