WASHINGTON, Nov 29 (Reuters) – U.S. single-family home prices slowed further in September as higher mortgage rates eroded demand, closely watched surveys showed on Tuesday.
The S&P CoreLogic Case Shiller national home price index dropped 0.8% month-over-month in September. Monthly house prices fell in July for the first time since late 2018.
House prices rose 10.6% year-on-year in September, slowing from August’s increase of 12.9%.
The housing market has been hammered by aggressive Federal Reserve interest rate hikes that are aimed at curbing high inflation by dampening demand in the economy.
The 30-year fixed mortgage rate breached 7% in October for the first time since 2002, data from mortgage finance agency Freddie Mac showed. Though the rate has retreated to average 6.58% last week, it remains well above the 3.10% average during the same period last year.
“As the Fed continues to move interest rates higher, mortgage financing continues to be more expensive and housing becomes less affordable,” Craig Lazzara, managing director at S&P DJI, said in a statement. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”
Data this month showed sales of previously owned homes logged their ninth straight monthly decline in October, while single-family homebuilding and permits for future construction dropped to the lowest levels since May 2020.
Tight supply will, however, likely keep a floor under house prices. A surge in remote work during the COVID-19 pandemic led to a housing market boom, driving prices to record highs.
A separate report from the Federal Housing Finance Agency showing home prices edged up 0.1% on a monthly basis in September after declining 0.7% in August. In the 12 months through September, prices climbed 11.0% after advancing 12.0% in August.
“The rate of U.S. house price growth has substantially decelerated,” said William Doerner, supervisory economist in FHFA’s Division of Research and Statistics.
“This deceleration is widespread with about one-third of all states and metropolitan statistical areas registering annual growth below 10 percent.”
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
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ATHENS, Nov 29 (Reuters) – A recovery in Greece’s residential real estate market picked up pace in the third quarter, as the economy continued to expand and inflation rose near a three-decade high, central bank data showed on Tuesday.
Property makes up a big chunk of household wealth in Greece, where the home ownership rate is about 73.5%, above the euro zone average of 66%, according to European Union statistics on income and living conditions.
Greece’s housing sector recovery has been driven by an expanding economy and foreign interest.
Apartment prices rose 11.2% in the third quarter from the corresponding period a year earlier, Bank of Greece data showed, and the pace was up from a 10.1% increase in the second quarter.
The uptrend benefited all areas of the market, including old and newly built apartments, and all regions, although price gains in capital Athens led the way.
Prices rose by 13% year-on-year in Athens, where home-sharing platforms such as Airbnb and a “golden visa” programme – a renewable five-year resident’s permit in return for a 250,000-euro ($285,000) investment in real estate – became popular.
Greece’s economy grew at an annual 7.7% clip in the second quarter, beating forecasts, but slowing from a pace of 8.0% in the first quarter, on strong consumer spending and investments.
Consumer inflation accelerated to 12.0% in September, near a three-decade high, after surging costs for energy, housing, transport and food.
House prices fell 42% between 2008 – when a protracted recession began – and the end of 2017. The market was hit by property taxes imposed to plug budget deficits, tight bank lending and a jobless rate that peaked at 27.8% in 2013.
Economic prospects improved later, with Greece emerging from its latest bailout in August 2018 and now accessing international markets for funding.
Following is a table on Greek apartment prices from Greece’s central bank:
**************************************************************
2016 2017 2018 2020 2021 Q3
Index 59.6 59.0 60.1 67.3 72.4 81.9
Change y/y % -2.4 -1.0 1.8 4.5 7.8 11.2
New (up to 5 years) 61.2 60.7 61.9 70.0 75.7 86.0
Change % -3.0 -0.8 2.0 4.9 8.1 12.2
Old (older than 5 years) 58.6 57.9 58.9 65.6 70.4 79.4
Change % -2.0 -1.2 1.7 4.2 7.2 10.5
—————————————————————-
source: Bank of Greece
Reporting by George Georgiopoulos; Editing by Clarence Fernandez
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LONDON, Nov 25 (Reuters) – British house prices will fall in 2023, putting an end to years of bumper rises, but a large crash was unlikely despite the cost of living crisis and increased borrowing costs putting a lid on buyers’ ability to fund purchases, a Reuters poll found.
As in much of the world, inflation has soared in Britain and so the Bank of England is pressing ahead with a series of interest rate increases just as the economy slips into a recession. That has put a bigger hole in the wallets of indebted consumers.
House prices fell for the first time in 28 months in October, according to a survey from the Royal Institution of Chartered Surveyors which also showed a measure of expectations for house prices in 12 months’ time slumped.
They will fall 4.7% next year nationwide, marking the first annual drop in over a decade, having likely risen 6.3% this year, according to the Nov. 8-24 poll of 20 housing market specialists.
“There is a rebalancing but nothing like we saw after the global financial crisis. Supply is still relatively tight so that is helping support prices,” said Chris Druce at estate agency Knight Frank.
During the financial crisis house prices fell around 19% from peak to trough but have since roughly doubled, according to Land Registry data.
UK housebuilder Taylor Wimpey Plc (TW.L) said earlier this month it would build fewer homes this year than originally planned while bigger rival Persimmon Plc (PSN.L) has said it expects 2023 land additions to be significantly lower, both likely affecting supply.
Prices will stage a modest recovery and increase 1.0% in 2024 – far behind expectations for general inflation – and then rise 3.5% in 2025.
When asked about the chance of a price crash within a year nine of 16 respondents said it was high or very high. Seven said it was low or very low. However, many of those who said the chance was high noted it would be more a correction than a crash.
“We see a one-year correction in 2023, with the economic performance and job numbers a little better than expected. 2023 will be a very difficult year but life will feel semi-normal in 2024,” said Tony Williams at consultancy Building Value.
The BoE has raised Bank Rate from a pandemic-era record low of 0.10% to 3.00% in under a year and is set to add another 50 basis points next month, another Reuters poll predicted, making borrowing even more expensive.
When asked how much prices would fall from peak to trough the median response was 10% but that would still not be enough to make housing affordable – as a group, analysts said prices would need to fall 15% to do so.
Peak-to-trough forecasts were in a 2.0% to 17.5% range.
Rating the value of national house prices on a scale of 1 to 10 from extremely cheap to extremely expensive, the median response from analysts was 8, up from August’s 7 estimate. In London it was an unchanged 8.
In London, usually bolstered by foreign investment and a dearth of supply, the median forecast showed prices would fall 7.0% next year. They will then flatline in 2024 and rise 4.0% in 2025, according to the poll.
Forecasts for next year were in a wide range, from a 12.5% drop to a 4.0% rise, highlighting uncertainty in the market.
“Prices have further to fall in London due to exacerbated affordability issues. New builds are also likely to plummet in London as build cost inflation and reduced development finance starts to bite,” said Mark Farmer at Cast Consultancy.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Jonathan Cable; polling by Sarupya Ganguly and Susobhan Sarkar; editing by Jonathan Oatis
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BENGALURU, Nov 25 (Reuters) – Australian housing prices that are on a steep decline will likely fall further next year, according to a Reuters poll of analysts who forecast a peak-to-trough slump of 16%, more than double the correction during the 2008 financial crisis.
Near-zero interest rates and a dearth of housing supply pushed home values across Australia up 25% during the pandemic, increasing homeowners’ wealth, but that has kept many first-time buyers off the property ladder.
However, the Reserve Bank of Australia (RBA) has lifted interest rates by 275 basis points this year to a nine-year high of 2.85% and is expected to add another quarter-point in December. Markets are pricing it to reach 4.00% by end-June.
That has hit home prices, pressuring the RBA to downshift to smaller rate hikes, as it is worried that aggressive tightening would sharply curtail household spending in an economy where a lot of wealth is tied up in housing.
Australian house prices have nearly doubled since the financial crisis but that boom has led to a build-up of household debt that could become a risk to financial stability.
Although average house prices have fallen 6.5% since a peak late last year, with losses spreading to every state capital, they are still well above pre-pandemic levels.
“We expect a peak to trough housing fall of 15-20% and this should be considered an orderly descent,” said Adelaide Timbrell, senior economist at ANZ.
“Strengthening population growth driven by immigration, as well as favourable labour market conditions will be protective factors against a more rapid decrease in prices or a crash.”
Estimates for a peak-to-trough correction were in a wide 13%-28% range in the Nov. 9-24 Reuters poll, highlighting the uncertainty.
On a calendar year basis, the poll showed average home prices falling 7.3% this year and 9.0% in 2023. The estimate for next year was unchanged from a September poll.
While lower house prices would help improve affordability, it would be a bitter pill to swallow for recent homeowners, watching their capital decline and facing higher repayments as interest rates rise.
“It is crystal clear that the RBA is now focussed on developments in the housing market. And their tightening cycle from here will determine how much further home prices will fall,” said Gareth Aird, head of Australian economics at CBA.
AMP, ANZ, Knight Frank and Macquarie said average house prices would have to fall between 25% and 45% to make Australian housing affordable.
“A substantial reversal would be required to make homes somewhat affordable,” ANZ’s Timbrell added.
Property prices in Sydney – the world’s second-most expensive housing market after Hong Kong – and Melbourne were forecast to fall 6.0-6.5% next year after declining 12.0% and 8.5% this year, respectively.
In Brisbane, Adelaide and Perth, they were expected to fall 7.0%, 6.5% and 5.0%, respectively, next year.
For other stories from the Reuters quarterly housing market polls:
Reporting by Vivek Mishra; Polling by Devayani Sathyan, Veronica Khongwir and Vijayalakshmi Srinivasan; Editing by Jonathan Cable and Rashmi Aich
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BENGALURU, Nov 24 (Reuters) – Once burning-hot Canadian house prices are expected to tumble a total 17.5% from their peak, roughly double the fall during the 2008-09 financial crisis, in a slowdown already well underway, according to a Reuters poll of market experts.
A succession of rapid-fire Bank of Canada interest rate rises that has taken the overnight rate from near-zero to 3.75% in just eight months has removed some steam from the market, with a doubling in the average five-year mortgage rate to near 5%.
But after a more than 50% rise in house prices during the pandemic on top of what was already seen as one of the world’s most expensive property markets, that expected fall would not be enough to bring prices to affordable levels.
With a debt to net disposable income ratio of 1.85, Canadian households are among the top most indebted in the world and more vulnerable to higher rates given their higher exposure to variable rate mortgages.
Peak-to-trough correction forecasts in the Nov. 8-22 poll of 12 property analysts ranged between 10% – about how much the market has already fallen – and 30%.
Tony Stillo, director of Canada economics at Oxford Economics, said higher mortgage rates and the panic run-up in prices during the pandemic had kept the average cost of housing “35% above the borrowing capacity of median income households.”
“Our forecast for a 30% decline in house prices in conjunction with steady income growth, a stabilization in mortgage rates and stronger growth in housing supply…will cause house prices to return to an affordable range by late 2025,” he said.
House prices need to fall 25% from peak to trough in order to make them affordable, according to the median response to an additional question. Responses ranged from 18% to 35%.
That was in line with BoC Senior Deputy Governor Carolyn Rogers who said this week house prices needed to fall to restore balance to the housing market.
After rising 11.8% this year compared with 2021, average house prices were expected to sink 10.0% next year and increase 1.3% in 2024, lagging consumer inflation, according to the median forecast in the poll.
“We have a unique situation where demand has cracked and buyers can’t qualify for, or afford, early-year prices. But, outside some areas, there’s not a bounty of listings to choose from, and sellers are still able to say ‘no thanks’,” said Robert Kavcic, senior economist at BMO Capital Markets.
Housing starts fell 11% last month as sellers held off listing in hope of a spring rally and surging borrowing costs dragged demand.
The central bank’s overnight rate was priced by markets to peak at 4.25-4.50% next year as consumer inflation is well over three times the BoC’s 2% target.
House prices in Toronto and Vancouver, regional epicenters of the biggest price booms in recent years, were forecast to drop 11.0% and 9.3% in 2023 after rising as much as 58% and 35% since the pandemic started.
Asked to rate average Canadian house prices on a scale of 1 to 10 where 1 was extremely cheap, 5 priced about right and 10 extremely expensive, the median forecast from 11 contributors rated it 8. For Toronto and Vancouver, the ratings were 9.
A majority of property market experts said the risk of a crash in house prices was low. During the financial crisis, U.S. house prices crashed as much as around 40% but the Canadian market fell only 9% then.
“In more ‘normal’ times before the pandemic, a 30% drop in house prices would be considered a crash. However, in the current context, where home prices surged 50% over just two years during the pandemic, a 30% price correction will still leave home values above pre-pandemic levels,” added Stillo.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Indradip Ghosh; Polling by Swathi Nair; Editing by Ross Finley, Jonathan Cable and Marguerita Choy
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FRANKFURT, Nov 24 (Reuters) – Risks in the German financial system are building as the economy heads for a recession and struggles with rising interest rates and sky-high energy prices, but a correction in the housing market is not imminent, the Bundesbank said on Thursday.
Europe’s largest economy has been among the top losers of Russia’s war in Ukraine because of its excessive reliance on Russian gas and the economy is now set to suffer a significant downturn starting in the fourth quarter of 2022.
“The macro-financial environment has deteriorated substantially,” the Bundesbank said in a Financial Stability Review. “Major downside risks remain.”
Rising costs, partly a function of higher European Central Bank rates, are limiting the financial leeway of households and enterprises, and this increases future credit risk.
Still, the Bundesbank did not expect a significant correction in house prices, which were in the past seen 15% to 40% overvalued.
“On balance, house prices are still rising, albeit at a slower pace,” Bundesbank Vice President Claudia Buch said. “That said, there are no signs of a severe slump in real estate prices or of overvaluations receding.”
Despite the downturn, the Bundesbank argued that it was not yet time for the country’s financial regulator to release a so-called countercyclical capital buffer – extra capital, built up during better times, to be used up during a slump.
“A worsening energy crisis, a sharp economic slump and abruptly rising market interest rates could put the German financial system under considerable pressure,” the bank added.
Extreme volatility in energy prices sharply increased the collateral requirements of central counterparties in derivatives trading but government measures cushioned the liquidity shortage and the overall supply of credit “has worked well”, it said.
Reporting by Balazs Koranyi; Editing by Alex Richardson
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BENGALURU, Nov 24 (Reuters) – New Zealand’s house prices are forecast to fall more than previously thought this year and next with a peak-to-trough slump of 18% as aggressive interest rate hikes weaken an already-slowing housing market, a Reuters poll found.
Average house prices in the country rose by more than 40% at the height of the pandemic before reaching a peak in November last year at levels the Reserve Bank of New Zealand (RBNZ) said were unsustainable.
As the RBNZ has aggressively hiked the cash rate, and mortgage rates have followed suit, prices have retreated sharply, but not enough to solve the affordability crisis that has left many potential homebuyers renting.
Average home prices were expected to decline by 11.5% this year and 6.0% in 2023, a Nov. 9-23 Reuters survey of 12 property analysts found.
Those estimates showed a slightly deeper decline than the 10.0% and 5.0% fall predicted in a September poll.
Still, that fall would be tiny compared to the 250% rise in New Zealand house prices since 1998, almost four times the average increase across OECD countries. House prices have nearly doubled in the last seven years alone.
“The fall has been very orderly so far,” said Sharon Zollner, chief economist at ANZ. “Even a 20% fall could be considered a soft landing. A hard landing would likely require an employment shock and forced sales, and we are not seeing any evidence to suggest this is happening en masse.”
Asked how much average house prices would fall from peak to trough, analysts who answered an additional question gave a median estimate of 18%, with forecasts in a 14%-23% range.
“In percentage change terms, this sounds rather drastic, but it’s still only a partial unwinding of the COVID period run-up,” Zollner said.
The RBNZ said it expects house prices to fall by around 20% from their peak a year ago but some respondents in the poll said more was required to make housing affordable.
Infometrics and Macquarie Bank said average house prices would have to fall by 33%-38% – almost the amount they fell around the time of the oil shock of 1973 – to make housing affordable.
“Things are moving in the right direction, but there is still a four-day camel trek away from being anywhere near affordable. But a lot needs to happen to better balance the housing market here with a horrible undersupply of houses,” said Jarrod Kerr, chief economist at Kiwibank.
While lower house prices would help improve affordability, it would be bad for recent homebuyers who would face seeing their capital decline and higher repayments as interest rates rise.
The RBNZ, which explicitly considers house prices in its policy deliberations, has hiked the overnight cash rate (OCR) by a total of 400 basis points to 4.25% since October last year and now sees it peaking at 5.5%.
Mortgage rates have gone up everywhere but they are likely to be felt more acutely in countries like New Zealand, Australia and Canada where more home loans are issued on floating rates.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Vivek Mishra; Polling by Devayani Sathyan, Veronica Khongwir and Vijayalakshmi Srinivasan; editing by Barbara Lewis
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BUDAPEST, Nov 21 (Reuters) – Commercial banks in Hungary cannot pay an interest rate that is higher than the yield on the three-month discount bill on deposits by certain large institutional and private investors, the Minister for Economic Development said on Monday.
Marton Nagy, a former central bank deputy governor, told state news agency MTI that the step was aimed at investors who took advantage of high central bank rates by investing their money in central bank deposits through commercial banks.
The National Bank of Hungary announced an emergency rate hike last month and introduced a quick deposit facility with an 18% interest rate, which helped shore up the forint currency following its fall to a record low in October.
Under the measure outlined on Monday by Nagy, until March 31, 2023 commercial banks cannot pay an interest rate that is higher than the yield on the three-month discount bill on deposits by investment companies, savings banks, building societies, investment funds and private citizens’ deposits of more than 20 million forints ($49,980.01).
These investors made use of high central bank rate and “they realized a risk-free interest rate of up to 18% that was, in the end, paid by the state,” Nagy said.
The yield on the three-month discount bill was about 12% on Monday.
The central bank did not immediately respond to questions from Reuters on the new regulation.
“This means that (the government) is neutralizing part of the monetary policy transmission mechanism. There will be a segment of the economy where high interest rates will not apply as some market participants will not be able to access them,” Peter Virovacz, senior economist at ING said.
The government has already introduced regulation on interest rates on certain loans. Nagy announced last month that Hungary would include variable-rate loans to small- and medium-sized businesses in a scheme designed to cap loan rates and avoid a recession. read more
($1 = 400.1600 forints)
Reporting by Anita Komuves, Editing by William Maclean
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LONDON, Nov 21 (Reuters) – German house prices will fall 3.5% next year as the cost of living crisis and rising borrowing costs hits consumers, but the chances of an outright crash are low, according to a Reuters poll of property market experts.
Harmonised consumer price inflation in Europe’s largest economy was 11.6% last month and the European Central Bank has been raising interest rates just as the bloc is likely heading into a recession, putting intense strain on household budgets.
Average house prices in Germany will fall 3.5% in 2023 the Nov. 8-18 poll of 12 market watchers predicted, a sharp turnaround from the 0.5% increase predicted in an August poll. In 2024 they will fall 0.5% but then rise 1.0% in 2025.
But when asked about the chances of a crash in the market over the coming year, 11 respondents said it was low and one said very low. Only one said it was high.
“Weakening demand for housing loans and declining purchasing power of consumers indicate the turnaround in the residential real estate market has already begun – however, we expect a significant price correction rather than a real crash in house prices,” said Carsten Brzeski at ING.
Still, the median response when asked how much prices would fall from peak to trough was 10.0%, with the steepest drop given as 17.5%.
“In the first quarter of 2022, we once again saw very high increases compared with the previous year – compared with these values, 10% less is quite realistic,” said Jörg Utecht at mortgage broker Interhyp.
Yet that fall would not be enough to make housing affordable, the poll found, with analysts saying a 20% drop from peak to trough would be needed after prices rose around 10% last year and were estimated to rise 3.0% this year.
On a scale of 1 to 10, where 1 is cheap and 10 expensive, respondents gave a median answer of 7 – putting buying a house out of reach for many first-time buyers or those wishing to upscale.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Jonathan Cable; Polling by Sujith Pai and Aditi Verma; Editing by Toby Chopra
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Nov 16 (Reuters) – Property firm British Land Co (BLND.L) reported a fall in valuations of its assets and slid into a half-year loss on Wednesday, as rising interest rates and inflation woes crimp the commercial real estate sector amid broader economic weakness.
Aggressive interest rate hikes to tackle inflation and deepening recession worries are seen snuffing out a tentative recovery in the commercial property sector from pandemic lows.
British Land said in a statement it expected to see yield expansion across its business in the second-half period, although impact would likely be cushioned by rental growth.
The Broadgate owner, which has a portfolio chiefly comprising office spaces and retail parks, said loss after tax came in at 34 million pounds ($40.3 million) for the six months ended Sept. 30, compared with a profit of 370 million pounds a year earlier.
The FTSE 100 firm said EPRA (European Public Real Estate Association) Net Tangible Assets, a key measure that reflects the value of its buildings, fell 4.4% to 695 pence, as of Sept. 30 from a year ago.
On Tuesday, its bigger peer Landsec (LAND.L) said it would slow the pace of its re-investment plans due to challenging economic conditions, after reporting a first-half loss.
($1 = 0.8435 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich
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