The health crisis has caused a global real estate boom, but this one which seems to be running out of steam, explains The Economist. This is particularly the case in several countries where selling prices are plummeting – to the despair of recent owners who have just acquired a property at a high price.
In Canada, New Zealand and Australia, prices have been falling steadily since May. In Sweden, the decline reached “almost 4% in June”, the biggest since the subprime crisis.
Even where prices continue to rise, the number of sales declines. In England for example, in May, they fell by 10% compared to last year. This is explained by the rise in interest rates, which are holding back potential buyers. In the United States, new buyers have never been so numerous for thirteen years.
A beginning of urban exodus
Experts from the British consultancy Capital Economics predict a drop of 5 to 10% in the United Kingdom and the United States. In Australia and Sweden, it could go up to 15%. In Canada and New Zealand, “prices could fall by 20%”. The Royal Bank of Canada estimates that the volume of sales in the country could fall by 40% compared to the peak of 2021.
The British daily nevertheless specifies that the housing shortage in these countries, combined with their low unemployment rate, could limit the damage. The demand is such in the United States, Canada or England that a spiral leading to a financial crisis should be avoided.
The cities most affected by the current drop in prices are those that have been particularly affected by the pandemic. The repeated confinements have prompted residents to leave the big cities to settle in the countryside. A trend observed in Paris, Istanbul, London or New York, where city dwellers have started to invest in rural areas or small towns. According The Economist, it is the beginning of an urban exodus that changes the game for local real estate markets .