Global housing markets are syncing up — and slowing down

Residential investment declined year over year for four straight quarters

Jan.January 28, 2020 09:50 AM
From top: London, New York and Hong Kong (Credit: Unsplash)

From top: London, New York and Hong Kong (Credit: Unsplash)

Residential investment in 18 large economies posted year-over-year declines for four straight quarters through last September (Credit: Unsplash, iStock)

The global economy grew at its slowest rate since the financial crisis last year. A big part of the slowdown came from cooling housing markets around the world, which have increasingly started moving in sync.

Residential investment in 18 large economies posted year-over-year declines for four straight quarters through last September, the Wall Street Journal reported citing an analysis from Oxford Economics. This string of declines was the longest the world economy has seen since 2008 and 2009.

“The housing market is a big asset market which has quite large potential impacts on consumer spending,” Adam Slater of Oxford Economics told the Journal. “It tends to be a sector when it booms, it booms; when it busts, it busts.”

In addition to a slowdown in the broader economy, residential markets have been constrained by affordability problems and heightened geopolitical uncertainty, including the U.S.-China trade war, Brexit, and protests in Hong Kong.

According to the International Monetary Fund — which projects worldwide economic growth to rebound somewhat this year — low interest rates have contributed to greater synchronization between housing markets, as yield-hungry investors scoop up real estate across the globe. A similar degree of synchronization has long existed in global stock and bond markets.

Home price increases have also been limited by new regulations. Vancouver introduced a foreign buyer tax in 2016, while New Zealand banned overseas investors from buying existing homes altogether in 2018. Meanwhile, Seoul has tightened restrictions on mortgage lending and capped residential prices. [WSJ] — Kevin Sun

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