Most of us read the international headlines. But what about the international real estate headlines? Here’s what bricks and mortar investments are doing around the globe in 2023.
Ever considered what’s happening in Canada’s real estate sector? Do you stop to consider if China has the same trends as our market? Wondered whether India is seeing limited supply or amplified demand in its industrial property sector? What about Germany’s retail assets – do you think about their relevance in 2023?
Like you, we’re focused on Australia’s property market, leaving little time (or reason) to consider any other country’s.
But even though it mightn’t influence your investment decisions here on Aussie soil, taking a glance at other nation’s property markets is… well, a little fun. And that’s not to say that the global real estate trends won’t impact or share similarities with ours.
So, here’s a snapshot of the globe’s property markets as of today:
China’s concerning property market
One thing that seems unanimously agreed upon is that China’s real estate bubble is in the process of bursting – and creating more damage than the country’s officials are letting on.
The Chinese property crisis continues after prolonged pandemic woes, but concerns are rising about the accuracy of China’s economic data, with worries that policymakers may not fully grasp the market’s dynamics.
This discrepancy is partly attributed to China’s survey-based data collection methods, which don’t always reflect market realities. The lack of transparency in housing data is evidently impacting buyer behaviour and future policy decisions, adding uncertainty to the market’s direction.
That said, China’s housing market appears remarkably resilient according to official statistics, despite sluggish economic growth and record developer defaults. New-home prices have only fallen 2.4 per cent from their peak in August 2021, while existing home prices dropped 6 per cent.
Property agents and private data sources reveal a bleaker picture, however, with existing home prices in prime areas of major cities like Shanghai and Shenzhen plummeting by at least 15 per cent in 2023, and declines exceeding a whopping 25-per cent near Alibaba’s headquarters in Hangzhou.
USA’s real estate market in 2023
As of August 2023, the US housing market is gradually returning to a more typical state following two extraordinary years often dubbed the “unicorn years.” There is a notable uptick in buyer demand, likely due to the peak summer selling season, and home prices are rebounding, indicating a healthier market.
Nevertheless, challenges persist, primarily in the form of limited housing supply and higher mortgage rates, which continue to impact affordability for potential buyers (sound familiar?).
A survey conducted by Freddie Mac in May 2023 revealed that 18 per cent of Americans are actively seeking to buy a home in the next six months, demonstrating a strong desire for homeownership.
The main hurdle faced by the housing market is the limited supply of homes for sale, leading to fewer options for new buyers and those looking to trade up or downsize. Despite earlier predictions of a significant price decline, home prices are rebounding and displaying stronger growth than expected.
Canada’s real estate market in 2023
In 2023, the Canadian housing market is displaying signs of stability and potential for both buyers and sellers. Recent statistics from the Canadian Real Estate Association (CREA) reveal an increase in home sales, new listings and values, suggesting a shift towards market equilibrium.
With new listings rebounding, buyers will have more options, and the market is expected to experience moderated price growth, partly influenced by recent Bank of Canada rate hikes (interest rates are at 5.00 per cent as of this writing, escalated from 0.50 per cent in March 2022).
While challenges do persist in the Great White North, Canada’s balanced market means it’s happy hunting for investors looking to buy before the new year.
The overall Canadian housing market appears to be on path to recovery. A drop in interest rates will only help its cause.
Italy’s “invisible recession”
The Italian property market in 2023 faces a complex landscape with challenges like an “invisible” recession, inflation pressures and geopolitical uncertainties.
Forecasts indicate a slowdown in property transactions, with 2023 expected to see 670 thousand sales, down by 14.6 per cent from the previous year, partly due to a growing reliance on mortgages and poor purchasing conditions.
Italian landlords are hoping an influx of tourists, students and younger renters will kickstart rental prices (which have been stagnant for some time). Because a widening gap between incomes and interest rates are causing trouble for many to repay their mortgages. Tightening bank credit conditions after the pandemic has not helped.
Demand for holiday homes – a typically active segment of the investment market – has decreased. This might be surprising, as it seems like half of Australia is visiting Italy this year.
United Kingdom’s uphill real estate battle
The UK property market in 2023 is facing big challenges, with home sales expected to plummet to the lowest levels in over a decade.
Established house sales are tipped to decline by 21 per cent year-on-year by the end of December 2023, totaling around 1 million transactions – the lowest since 2012. This downturn is mainly owed to – you guessed it! – the soaring cost of mortgages, with annual house prices experiencing their sharpest drop in 14 years, dropping by 3.8 per cent in July 2023.
Sales with a mortgage are forecasted to decrease by 28 per cent this year, while cash transactions will remain relatively stable, decreasing by only 1 per cent. This of course leaves the more affluent, mature players to play in the market.
Renting remains on average 10 per cent cheaper than making mortgage payments in the UK. It seems the housing affordability crisis has spread across the globe as fast as COVID-19 did. Most alarming, is that a viable solution to this issue still appears to stump experts around the world.
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