{"id":46314,"date":"2022-07-27T11:36:19","date_gmt":"2022-07-27T15:36:19","guid":{"rendered":"https:\/\/www.bloomberg.com\/professional\/insights\/markets\/worlds-bubbliest-housing-markets-are-flashing-warning-signs\/"},"modified":"2023-03-08T16:29:13","modified_gmt":"2023-03-08T21:29:13","slug":"worlds-bubbliest-housing-markets-are-flashing-warning-signs","status":"publish","type":[3762],"link":"https:\/\/www.bloomberg.com\/professional\/insights\/markets\/worlds-bubbliest-housing-markets-are-flashing-warning-signs\/","title":{"rendered":"World\u2019s bubbliest housing markets are flashing warning signs"},"content":{"rendered":"<div  class=\"bbg-row-container\">\n    <style>section[data-anchor=row-6a03f57473274]::before {\n\t\t\t\tbackground-color: #eeeeee;\n\t\t\t}<\/style>\n    <section class=\"bbg-row bg--custom-color  bg--eeeeee text--black bbg-row--full-bg-bleed\" data-anchor='row-6a03f57473274'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8 bbg-column--valign-bottom\"\n    style=\"\"\n    >\n    <p>    <ul class=\"bbg-categories_list\">\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/markets\/\" rel=\"category tag\">\n                    Markets\n                <\/a>\n            <\/li>\n            <\/ul>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 24px !important\"\n    >\n<\/div>    <h1 class=\"bbg-metadata bbg-metadata--title\">World\u2019s bubbliest housing markets are flashing warning signs<\/h1>\n<\/p>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a03f57479bdd'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer\"\n        style=\"height: 40px !important\"\n    >\n<\/div><div\n\tclass=\"bb-wysiwyg byline\"\n\t\t>\n\t<p><strong>Bloomberg News <\/strong><\/p>\n\n<\/div>\n    <p class=\"bbg-metadata bbg-metadata--date\">July 27, 2022<\/p>\n<\/p>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none bbg-row--full-bg-bleed\" data-anchor='row-6a03f5747c54b'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <p><div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><i><span style=\"font-weight: 400\">This article was written by Enda Curran. It appeared first on the Bloomberg Terminal.<\/span><\/i><\/p>\n<p>A world economy already contending with raging inflation, stock-market turmoil and a grueling war is facing yet another threat: the unraveling of a massive housing boom.<\/p>\n<p>As central banks around the globe rapidly increase interest rates, soaring borrowing costs mean people who were already stretching to buy property are finally reaching their limits. The effects are being seen in countries such as Canada, the US and New Zealand, where once-hot residential real estate markets have suddenly turned cold.<\/p>\n<p>It\u2019s a sharp reversal from years of surging prices fueled by rock-bottom mortgage rates and government stimulus, along with a pandemic that popularized\u00a0remote work and sent homebuyers on the hunt for bigger spaces. An\u00a0analysis\u00a0by Bloomberg Economics shows that 19 OECD countries have combined price-to-rent and home price-to-income ratios that are higher today than they were ahead of the 2008 financial crisis \u2014\u00a0an indication that prices have moved out of line with fundamentals.<\/p>\n\n<\/div>\n<div class=\"bbg-interstitial\" aria-label=\"interstitial\" tabindex=\"0\">\n\t<style>\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\tbackground:rgba(0,0,0,0);\n\t\t\tpadding: 104px;\n\t\t\t\n\t\t\t\n\t\t}\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content, .bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content p{\n\t\t\tcolor:inherit;\n\t\t}\n\t\t@media (max-width: 768px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 32px;\n\t\t\t}\n\t\t}\n\t\t@media (max-width: 480px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 18px;\n\t\t\t}\n\t\t}\n\t<\/style>\n\t<div class=\"wpb_content_element bbg-card  bbg-card-dark bbg-card_hasCta has_interstitial\" id=\"card_1\" data-card_type=\"no_image\">\n  \n  \n  <div class=\"bbg-card__innerwrapper\">\n    <div class=\"bbg-card__content\">\n      \n      \n                      <h3 class=\"bbg-card__title\">Bloomberg private banking solutions<\/h3>\n      \n              <div class=\"bbg-card__wysiwyg bb-wysiwyg\"><p>Learn more<\/p>\n<\/div>\n          <\/div>\n\n          \n<div\n  id=\"cta_2681964088266738054\"\n  class=\"wpb_content_element bbg-cta icon icon-arrow\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p right\">\n      <a\n        class=\"bbg-cta-link link interstitial_cta\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/solutions\/private-wealth-management\/private-banking\/\"\n        target=\"_blank\"\n        rel=\"\"\n        data-section-name=\"\"\n                role=\"button\"\n        aria-label=\"Learn more\"\n        >\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n\n      <\/div>\n\n  <\/div>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"720\" height=\"899\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/vf-New-Zealand.png\" class=\"bbg-single-image__image attachment-large\" alt=\"New Zealand at Top of Risk Ranking\" title=\"vf-New-Zealand\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/vf-New-Zealand.png 720w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/vf-New-Zealand.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/vf-New-Zealand.png 481w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>Taming frothy home prices are a key part of many policy makers\u2019 goals as they seek to quell the fastest inflation in decades. But as markets shudder from the prospects of a global recession, a slowdown in housing could create a ripple effect that would deepen an economic slump.<\/p>\n<p>Falling home prices would erode household wealth, dent consumer confidence and potentially\u00a0curb future development. Animal spirits are typically tamed when people are faced with higher repayment costs on an asset that\u2019s losing value. And property construction and sales are huge multipliers of economic activity around the world.<\/p>\n<p>\u201cThe danger is business and financial cycles turning down simultaneously, which can lead to longer-lasting recessions,\u201d said Rob Subbaraman, head of global markets research at Nomura Holdings Inc. \u201cA decade of QE has fueled frothy housing markets and we could be entering the other side of this soon, as housing affordability is stretched and debt-service ratios could rise sharply.\u201d<\/p>\n<p>Such a scenario would gum up bank lending as the risk of bad loans increases, choking the flow of credit that economies thrive on. In the US and Western Europe, the housing crash that precipitated the financial crisis hobbled banking systems, governments and consumers for years.<\/p>\n<p>To be sure, a 2008-style collapse is unlikely. Lenders have tightened standards, household savings are still robust and many countries still have housing shortages. Labor markets are also strong, providing an important buffer.<\/p>\n<p>\u201cLower prices will have a direct effect on consumer spending and the whole economy, as\u00a0typically real estate makes up a significant part of households\u2019 wealth,\u201d said Tuuli McCully,\u00a0head of Asia-Pacific economics at Scotiabank. \u201cNevertheless, as household balance sheets in\u00a0many major markets remain healthy, I am not particularly worried about risks related to house\u00a0prices and the world economy.\u201d<\/p>\n<p>Still, the risk of a sharp drop in prices is clearly greater when there\u2019s a synchronized global tightening of monetary policy, said Niraj Shah of Bloomberg Economics in London. More than 50 central banks have raised interest rates by at least 50 basis points in one go this year, with more hikes expected. In the US, the Federal Reserve last week boosted its main interest rate by 75 basis points, its biggest increase since 1994.<\/p>\n<p>Housing markets in New Zealand, the Czech Republic, Australia and\u00a0Canada rank among the world\u2019s bubbliest and are particularly vulnerable to falling prices, according to Bloomberg Economics. Portugal is especially at risk in the euro area, while Austria, Germany and the Netherlands also are looking frothy.<\/p>\n<p>In Asia, South Korea house prices also look vulnerable, according to an analysis by S&amp;P Global Ratings. That report noted risks from household credit relative to nominal GDP, the growth rate of household debt and the speed of house-price gains. Elsewhere in Europe, Sweden has seen a dramatic turnaround in housing demand, sparking concern in a country where debt runs at 200% of household income.<\/p>\n<p>Goldman Sachs Group Inc. economists wrote in a report last week that the signals from home sales typically precede prices by about six months, indicating that\u00a0several countries are likely to see further declines in values. A substantial\u00a0cooldown in housing markets is an important reason why developed economies will likely slow, according to\u00a0the economists led by Jan Hatzius.<\/p>\n<p>\u201cThe very rapid deterioration in affordability and large drops in home sales suggest that a hard\u00a0landing is a meaningful risk, especially in New Zealand, Canada, and Australia, although that is not\u00a0our baseline given current tightness,&#8221; the Goldman economists wrote.<\/p>\n<p>Central banks are issuing warnings of their own. The Bank of\u00a0Canada said this month in its\u00a0annual review\u00a0of the financial system that high levels of mortgage debt are of particular concern as interest rates rise and more borrowers are strained to pay bills.\u00a0The Reserve Bank of New Zealand\u2019s\u00a0semi-annual Financial Stability Report said that the overall threat to the financial system is limited, but a \u201csharp\u201d decline in house prices is possible, which could significantly reduce wealth and lead to a contraction in consumer spending.<\/p>\n<p>\u201cAs borrowing costs rise, real estate markets face a critical test,\u201d Bloomberg&#8217;s Shah said. \u201cIf central bankers act too aggressively, they could sow the seeds of the next crisis.\u201d<\/p>\n<p>Here is what\u2019s unfolding in bubbly housing markets around the world.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"534\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"water-vf1\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 1536w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water-vf1.jpg 2000w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n                <figcaption class=\"bbg-single-image__caption\" style=\"text-align: left\">\n                The Ponsonby area of Auckland.\u00a0Economists expect New Zealand house prices will fall about 10% this year and may eventually drop as much as 20% from their late 2021 peak.\n        <\/figcaption>\n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>New Zealand<\/h2>\n<p>If 2021 was the year New Zealand\u2019s house-price growth reached dizzying heights, with an annual increase of close to 30%, 2022 is shaping up to be the year the music stops \u2014\u00a0and the abrupt change has left people scrambling.<\/p>\n<p>In March, Jonathan Milne decided it was time to sell a family home in the Auckland suburb of Onehunga and purchase a larger house nearby for NZ$2 million ($1.3 million). He and his wife, Georgie, were optimistic of a speedy sale and a good price for their old home, which was valued by the local government at NZ$1.8 million.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"459\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png\" class=\"bbg-single-image__image attachment-large\" alt=\"Soaring prices are expected to give way to declines next year\" title=\"ups-and-downs\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/ups-and-downs.png 1296w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>All that changed in April when the RBNZ took aggressive action to tackle inflation, hiking the official rate by 50 basis points to 1.5% \u2014 its biggest increase in 22 years. It quickly followed with another 50-basis-point jump in May and a projection for the rate to peak at close to 4% next year.<\/p>\n<p>Milne\u2019s house was meant to be sold in May via auction, a popular method of home sales in New Zealand, but not a single bidder showed up for the event.<\/p>\n<p>\u201cWhat we didn\u2019t anticipate was that it would be so hard to market and sell our house,\u201d said Milne, the 47-year-old managing editor of a news website. \u201cWe knew that every week that passed would knock another NZ$100,000 off the price.\u201d<\/p>\n<p>At the end of last month, they accepted an offer that Milne described as \u201cdramatically\u201d below the government valuation.<\/p>\n<p>Economists expect New Zealand house prices will fall about 10% this year and may eventually drop as much as 20% from their late 2021 peak. While for many homeowners that\u2019s a small decline compared with the massive equity gains in recent years, there likely will be broader effects. ANZ Bank forecasts subdued consumer spending due to a mixture of people feeling poorer because of falling house prices, the impact of higher rates on cash flow, as well as higher food and energy prices, according to\u00a0Sharon Zollner, the bank\u2019s New Zealand chief economist.<\/p>\n<p>\u201cThere are going to be house buyers who have just entered the market in the last year or so who started off with a mortgage rate of 2.5% and all of a sudden they are rolling off on to a mortgage rate closer to 6%,\u201d said Jarrod Kerr, chief economist at Kiwibank in Auckland. \u201cThere is going to be some pain for sure.\u201d\u00a0<em>\u2014\u00a0Ainsley Thomson<\/em><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"533\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"building\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 1536w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 2048w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/building.jpg 600w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n                <figcaption class=\"bbg-single-image__caption\" style=\"text-align: left\">\n                In April, Canada posted its first national home price decline in two years. The pain was\u00a0concentrated around the markets which saw the biggest pandemic runups \u2014 Toronto and its surrounding regions.\n        <\/figcaption>\n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>Canada<\/h2>\n<p>The housing market in Canada has turned so fast some buyers are\u00a0losing money\u00a0on their properties before the sales even close.<\/p>\n<p>\u201cPeople are actively trying to get out of deals,\u201d said Mark Morris, a Toronto-based real estate lawyer who cited one example where a property\u2019s assessed value came in C$200,000 ($155,000) less than the purchase price agreed to only a couple months before. That left the buyer willing to give up their C$100,000 deposit to avoid closing, he said. \u201cI\u2019m called several times a day by various people who feel that they\u2019ve paid too much.\u201d<\/p>\n<p>Such cases are cropping up after Canada posted its first national home-price decline in two years in April,\u00a0followed by another drop in May. Though so far the pain has been concentrated around the markets which saw the biggest pandemic runups \u2014 Toronto and its surrounding regions \u2014 the strains are already starting to spread to formerly hot markets around Vancouver too.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"490\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png\" class=\"bbg-single-image__image attachment-large\" alt=\"Prices are down almost 9% since February\" title=\"Peak-Housing-in-Canadas-Largest-City\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 100w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Peak-Housing-in-Canadas-Largest-City.png 1296w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>Like in other countries, the turmoil in Canada\u2019s housing market is being caused by an aggressive campaign to raise interest rates by the central bank. The benchmark has already gone from 0.25% at the beginning of the year to 1.5% today. With even higher rates expected, some economists say home prices could fall as much as 20% in the hottest markets.<\/p>\n<p>It\u2019s a drastic change in a country that saw prices rise by more than 50% over the two years since the pandemic started. With prices rapidly outpacing wage growth, some buyers\u2019 hope of entering the market came from low rates that are now jumping.<\/p>\n<p>\u201cIt\u2019s the marginal buyer who\u2019s supporting current valuations, so that could mean significant impact on the housing market,\u201d said Matthieu Arseneau, deputy chief economist at National Bank of Canada, who says home prices nationally could fall as much as 10%. \u201cWill new buyers be able to afford those prices at these rates?\u201d\u00a0<em>\u2014\u00a0Ari Altstedter\u00a0<\/em><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"533\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"water\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 1536w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 2048w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/water.jpg 600w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n                <figcaption class=\"bbg-single-image__caption\" style=\"text-align: left\">\n                In Cape Coral, Florida, about one in three home sellers dropped prices in April.\n        <\/figcaption>\n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>US<\/h2>\n<p>Mabel Melendi could tell the housing market in Cape Coral, Florida, was slowing after a week went by and she still hadn\u2019t received any inquiries or offers on a newly constructed home she listed in mid-April.\u00a0Just three months ago, she received a bid on a similar property within three days of putting it on the market.<\/p>\n<p>But after three price cuts \u2014\u00a0knocking the asking price down to $425,000 from $510,000 \u2014 and more than two months after the initial listing, she was still looking for buyers in mid-June. One offer that came in over Memorial Day weekend fell through after the buyer couldn\u2019t qualify for a large enough mortgage.<\/p>\n<p>\u201cMost of the people don\u2019t qualify for what they used to qualify for before,\u201d Melendi said.<\/p>\n<p>Mortgage rates have increased this year at the\u00a0fastest pace\u00a0in records dating back a half century, according to Freddie Mac. The average rate for a 30-year loan\u00a0reached 5.78% last week, the highest since 2008. That\u2019s led to\u00a0price cutsfor both builders and existing-home sellers as demand\u00a0rapidly cools.<\/p>\n<p>Almost 20% of US home sellers cut prices in the four-week period ended May 22, the most since October 2019,\u00a0according to\u00a0the brokerage Redfin Corp. The share was higher in some markets that became hot destinations\u00a0during the pandemic for people seeking more affordably-priced homes. In Boise, Idaho, for example, 41% of sellers\u00a0dropped prices\u00a0in April. In Cape Coral, it was about one in three.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"511\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png\" class=\"bbg-single-image__image attachment-large\" alt=\"The share of homes for sale with price cuts is climbing in once-hot areas\" title=\"sellelrs-drop-prices\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/sellelrs-drop-prices.png 1296w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>Sellers are realizing that prices may not keep rising at the same pace they previously did as buyers are increasingly squeezed, said Daryl Fairweather, Redfin\u2019s chief economist. \u201cPrices are going to have to come down to match demand,\u201d she said.<\/p>\n<p>After rising by an estimated 18% in 2021, US single-family home prices are\u00a0forecast\u00a0to grow by a more moderate pace of 10% in 2022 and 5% in 2023, according to Freddie Mac.\u00a0\u201cIt\u2019s a pretty significant slowdown, but coming from scorching-hot house-price growth,\u201d said Len Kiefer, the company\u2019s deputy chief economist.\u00a0A\u00a0shortage of homes for sale and pent-up demand from people seeking more space \u2014\u00a0along with millennial buyers getting older and starting families \u2014 means prices nationally should still trend higher,\u00a0he said.<\/p>\n<p>Still, the effects of slowing demand are reverberating through the real estate industry: Redfin and Compass Inc. said last week that they will lay off employees after the sudden cooldown in the market.\u00a0<em>\u2014\u00a0Jonnelle Marte<\/em><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"534\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"maxxus-reality\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 1536w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/maxxus-reality.jpg 2000w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n                <figcaption class=\"bbg-single-image__caption\" style=\"text-align: left\">\n                To tame inflation that reached\u00a016% in May, the Czech central bank has been on a monetary tightening\u00a0campaign\u00a0that lifted interest rates to the highest level since 1999.\u00a0\n        <\/figcaption>\n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>Czech Republic and Hungary<\/h2>\n<p>The Czech Republic stands out in Europe for its high homeownership rate, fast inflation and low unemployment, said Vit Hradil, a senior economist with Prague-based investment firm Cyrrus. Combined with a uniquely complex construction permit system\u00a0and growing demand from expats seeking work in the capital, the country has faced staggering price increases that have far outpaced income growth.<\/p>\n<p>A quarterly gauge of Czech house prices rose\u00a026% in the December from the previous year, according to London-based data analysis company CEIC Data. The difference between an average citizen\u2019s income and real estate prices in the country is now one of the widest in the European Union, raising serious bubble fears.<\/p>\n<p>To tame inflation that reached\u00a016% in May, the Czech central bank has been on a monetary tightening\u00a0campaign\u00a0that lifted interest rates to the highest level since 1999, before another meeting this week.<\/p>\n<p>\u201cYou would expect these rates to cool demand but, with inflation rates that much higher, it\u2019s not working,\u201d said Hradil, who added that people in the country see housing as an inflation hedge and prefer investing in real estate rather than stocks.<\/p>\n<p>In Prague, video-effects producer Meera Sankar gave up on buying a home. Initially aiming to find a one-bedroom apartment in the city center for 3 million koruna ($130,000), the Ireland native eventually doubled her budget, but still couldn\u2019t find an apartment that met her criteria. What she found either needed complete renovation or was in a remote or relatively unsafe area.<\/p>\n<p>\u201cFor this kind of money you can get a huge four-bedroom house near Cork, Ireland, or a 150-square-meter apartment in my dad\u2019s hometown in India,\u201d she said. \u201cIt just doesn\u2019t add up.\u201d<\/p>\n<p>The Czech Republic ranks second on Bloomberg Economics\u2019 bubble measure, followed by its regional neighbor, Hungary. There, Prime Minister Viktor Orban has pushed homeownership\u00a0incentives\u00a0in a bid to boost fertility rates.<\/p>\n<p>Prices in the country increased almost 20% in the last three months of 2021, compared with the same period a year earlier, according to the European Union\u2019s data agency\u00a0Eurostat.\u00a0The situation has only been exacerbated by the war in Ukraine, which has pushed up\u00a0energy costs and limited construction-worker availability.\u00a0Last week, the central bank unexpectedly raised the key interest rate by 50 basis points.\u00a0<em>\u2014\u00a0Alice Kantor<\/em><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"530\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"hello\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 1536w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/hello.jpg 2000w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n                <figcaption class=\"bbg-single-image__caption\" style=\"text-align: left\">\n                Though the Bank of England has increased rates five\u00a0times in recent months, areas such as London are thriving.\n        <\/figcaption>\n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>UK<\/h2>\n<p>The UK housing market is starting to\u00a0slow\u00a0after two years of historic growth. As part of pandemic measures, homebuyers were exempt from a stamp tax duty\u00a0on properties valued at up to\u00a0\u00a3500,000 ($614,000) between July 2020 and June of last year, sending prices escalating even further and making housing \u201cseemingly detached from the rest of the economy,\u201d\u00a0said Tom Bill, head of UK residential research at Knight Frank.<\/p>\n<p>Now, the Bank of England has increased rates five times in recent months, with more hikes expected\u00a0to come. That may portend a cooldown in real estate for the rest of the year, with more supply becoming available as homeowners rush to beat declines in values, Bill said.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"467\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png\" class=\"bbg-single-image__image attachment-large\" alt=\"House prices hit a new record but the market is showing signs of cooling\" title=\"housing-boom\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png 600w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/housing-boom.png 1296w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>Already, approvals for new home loans have\u00a0dropped\u00a0to the\u00a0lowest in almost two years. Buyer inquiries\u00a0fell in May after gaining for eight straight months, according to a\u00a0survey\u00a0from the Royal Institution of Chartered Surveyors.<\/p>\n<p>\u201cPeople are worried about the economy, about how the war in Ukraine will affect prices and the rising cost of living,\u201d said Aneisha Beveridge, head of research at UK real estate company Hamptons International. \u201cThey\u2019re more cautious.\u201d<\/p>\n<p>The Bank of England decided this week to\u00a0scrap\u00a0affordability tests, which gauge borrowers&#8217; ability to repay their mortgages, as of Aug.\u00a01. That could increase the\u00a0risk\u00a0of first-time homebuyers making purchases they can&#8217;t afford.<\/p>\n<p>Still,\u00a0areas such as prime London are faring well, Bill said, as foreign investors flock to the international destination and students return following the pandemic. Secondary\u00a0cities like Birmingham, Liverpool and Manchester are seeing their prices grow even faster than in the capital.<\/p>\n<p>\u201cAs long as the UK is seen as a country with a rule of law, good schools, and the respect of private property, money will always flow in,\u201d Bill said.\u00a0<em>\u2014\u00a0Alice Kantor<\/em><\/p>\n\n<\/div>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <style>section[data-anchor=row-6a03f574a45b0]::before {\n\t\t\t\tbackground-color: #eeeeee;\n\t\t\t}<\/style>\n    <section class=\"bbg-row bg--custom-color  bg--eeeeee text--black bbg-row--full-bg-bleed\" data-anchor='row-6a03f574a45b0'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <div\n    class=\"bbg-column\"\n    style=\"\"\n    >\n    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