Hari Kishan

BENGALURU (Reuters – The steady rise in house prices is expected to ease but not stop in the major property markets in next year. This outlook was based on Reuters polling and would only exacerbate affordability, as higher interest rates will also increase.

Nearly three-quarters (74/103) of those surveyed in the past week said that housing will become more costly and be less affordable over the next two to three decades.

A lot of people who struggled to save money during the recession will find it difficult to get their first house.

“The greatest danger is to younger generations who aren’t able to accumulate the necessary deposits. Although households are saving a lot during the pandemics, those with little equity have seen their prices rise,” stated Liam Bailey from Knight Frank’s global head of research.

Years of low interest rates, and the chronic lack of affordable housing had already caused house prices to soar in major markets before the pandemic.

This rise in price was made worse by the fact that many people who are well-off and can work from home during pandemic lockdowns started looking for additional space.

In fact, major housing markets outperformed their broader economies and property market analysts’ optimistic predictions.

Five of these markets, the United States of America, Australia, Canada and Dubai, have seen house prices rise at roughly twice the rate that analysts predicted.

However, despite this outperformance only one of the 111 analysts who gave house price predictions across eight markets predicted that they would fall in next year.

Just over 10% of respondents predicted modest drops for 2023. This was only true for Australia, New Zealand, and Canada — three of the most valuable property markets in the world.

All markets were expected to see a halving of the rapid pace of home price appreciation, which was in many cases double-digits. In most places, however, it would still exceed average wage increases.

According to traditional measures, the housing market has become less affordable in recent years. The low interest rate means that everything is okay at the moment. Knight Frank’s Bailey said that if the interest rate rises significantly then it will be a problem.

Interest rates will rise next year from their record lows, as consumer price inflation is at an all-time high in Britain and the U.S. It is not clear how high they will go over the next year, and beyond 2023.

When asked what would have the greatest impact on the prices of the housing market in 2019, 83 percent of the 106 respondents chose higher interest rates (46), or more supply constraints (37)

Five of the respondents said they desired more space for living, three others suggested lower immigration while two other said there is higher inflation. Nine others mentioned other factors.

A shortage in building materials caused by the global pandemic, which has clogged up international trade, is one of the challenges that will likely persist through 2019.

This will not help to speed up the construction of affordable housing at an already slow pace.

Geraldine Guichardo from JLL, Global Head of Research, Hotels and Living Sector said that some of the demand is starting to cool down.

Guichardo is optimistic about the next three to five years. As developers continue building, she expects that there will be more equilibrium in the market.

She stated that construction costs and supply chain issues will make it slower for projects to move because they are more expensive.

(Other stories taken from the global Reuters Housing Market Poll: