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The average price of a home across 55 countries rose 9.2 percent from June 2020 to June 2021, the fastest rate since the 12 months ending in March 2005, according to consulting firm Knight Frank.
The rate of increase was 4.3 percent between June 2019 and 2020.
Australia, Canada, New Zealand, Russia, Turkey, and the U.S. saw prices gain more than 16 percent; one in three of the 55 countries registered double-digit price growth.
India and Spain were the only countries where home prices fell, the company said.
“This is a story largely confined to advanced economies, where support measures have protected jobs and enabled significant savings,” Kate Everett-Allen, Knight Frank’s head of residential research, told the Financial Times.
The price gains were more than twice as great in advanced economies than in emerging nations, Knight Frank found.
In the first quarter of this year, house prices around the world saw their greatest rise in two decades, an FT study earlier this year revealed.
Housing markets in Canada, New Zealand, the U.K., and the U.S. were “on fire,” Goldman Sachs economist Sid Bhushan told the FT, fueled by low interest rates, a burst of demand set off by the groundshift to remote work, and savings accounts that swelled with cash as people lost opportunities to spend.
(We have documented this trend for the past year, most recently in “Home Sales, Prices Still Rising,” 27 Jul 2021.)
Average mortgage interest rates have fallen by more than half in several countries, including Germany, the U.K., and U.S., Oxford Economics reported, due in large part to cheap money policies central banks implemented during the global economic shutdown.
Also, prices have been pushed to record levels by historic short supplies of homes for sale in Canada, the U.K., and U.S., while shortages of building materials have hampered builders’ efforts to make more homes available.
However, the housing boom might be exhausting itself, as we signaled in “Home Sales Fall as Inventories Dry Up, Prices Climb” (25 May 2021).
Most people who are shopping for a home and qualify for a mortgage already have done so, analysts think; the number of U.S. mortgage applications is declining, as they are in Canada, according to economist Stephen Brown at Capital Economics.
House price in Canada is “close to a peak,” Brown said, adding that a decline in the number of properties sold and in the ratio of new listings to houses sold “no longer points to a further acceleration in house price growth,” he noted to the FT.
TREND FORECAST: Again, the Fed chair Jerome Powell said back in February that inflation was “soft” and temporary. As the numbers prove it is neither.
As inflation spikes many central banks, as we have detailed in last week’s Trends Journal, are raising interest rates. We maintain our forecast, however, that considering the market volatility, the U.S. Fed will not raise them this year, nor will it cut back its $120 billion per month bond buying scheme.
Rising rates, i.e., making cheap money more expensive, will send financial markets into a tailspin, which will do the same to housing, destroy the junk bond market and send the global economy into the Greatest Depression.
Indeed, when America’s economy crashes, it will be the shock heard, and felt, around the world.