High interest rates affecting housing dreams over the world
New Zealanders and Canadians who purchased homes during the boom years are still paying higher interest rates on their loans.
The landlords’ distress is increasing from the UK all the way to South Korea. The higher interest rate is making it even harder to build.
One thing was when rates suddenly rose and people were faced with higher monthly payments. They thought that they could make do or even take out mortgages, in the hope of refinancing at a later date. But it’s another thing when those higher costs last for years.
The shock that spread through the global housing markets when central banks quickly raised interest rates in 2013 has given rise to a cold and new reality.
Around the world, markets are trapped between soaring borrowing costs and a lack of homes which keeps prices high. The housing market has been made even more expensive in some areas, and those who own property with resetting debts face increased financial strain.
Although the scenario may vary from one country to another, it is clear that global economies are at risk as more people pay for housing whether they rent or buy.
Homeownership is no longer a viable path to financial security for the middle class, as buyers are increasingly being locked out. This has a profound impact on the ability of homeowners to maintain their lifestyles. The long-time homeowners who have taken advantage of rising property values and/or do not have mortgages are the ones to benefit.
Much remains unknown. A deeper war in the Middle East, and China’s economic struggles – a series of crises that are centered around its highly indebted property developers – could all contribute to an underlying global downturn.
This would lower housing demand substantially and cause financial turmoil. Real estate is becoming more problematic for the economic situation, especially commercial property.
The consumer is starting to understand that the borrowing costs might never again be as cheap as in the 15-year period following the financial crises.
The US market is dominated primarily by 30-year mortgages. Homeowners with low rates do not want to sell their homes and buyers face a squeeze.
Rate hikes are unlikely to affect the vast majority of homeowners, who are currently sitting on equity levels that are near records. This could force them to sell or cause foreclosures, allowing buyers the chance to enter the marketplace.
Hong Kong is also being affected by China slowing down, an exodus of residents and rising interest rates. These factors have all slowed the previously unstoppable growth in price. As its currency is pegged with the greenback, Hong Kong’s money policy moves along with that of the US.
Hong Kong’s housing market is still going to suffer if the interest rate doesn’t start dropping. Prices have been so high over the last decade in Hong Kong that it is still difficult for many to buy homes.
The mortgage rate has more than doubled from the beginning of 2020. Existing home values in the notoriously high-priced area have fallen by six years, builders are giving deep discounts, and the federal government is cutting extra stamp duties to help revive the hub.
In the US the combination of low inventory and rising prices with the highest mortgage rates of a generation have sent sales of pre-owned homes to their lowest levels since 2010.
Intercontinental Exchange’s data shows that home prices are now at their lowest in forty years. For a typical property, about 40 percent of the median household earnings is required.
The worst effects may not be seen for some time. Goldman Sachs’ economists, in a recent report, said that the effect of mortgage rates rising will be more pronounced by 2024. They projected that transactions would reach the lowest levels since the early 90s.
There are knock-on effects. This could have a knock-on effect.