Disruption, but not destabilization, prevailed in the international housing market between the last quarter of 2022 and the corresponding period of 2021, with most countries in Europe recording a decline in real prices after many years. Internationally, house prices rose by an average of 6% over the period under review. In real terms, however, taking inflation into account, prices fell by 2% for the first time in a dozen years.

Despite a jump in lending rates, the global housing market remained resilient overall, with real prices 7% above pre-pandemic levels. However, according to data from the Bank for International Settlements (BIS), significant changes were observed in 2022.

Turkey is at the forefront of changes

In particular, among 58 countries, the largest annual change in the nominal value of houses was recorded in Turkey, with an increase of 167.9% and in real terms by 51% due to unaccounted inflation. Demand for real estate increased significantly in the country, while at the same time – following the unorthodox monetary policy of Turkish President Recep Tayyip Erdogan – interest rates dropped dramatically from 19% to 8.5%.

It is followed by a very large margin by Serbia and Russia with an increase of 23.1% in nominal terms both, while an increase of 7% and 9.7% respectively was the increase in real terms. North Macedonia and Iceland complete the top five. Then there are Croatia, Estonia, Israel, Hungary and Lithuania.

In the BIS ranking, Greece is in 13th place, as between the fourth quarter of 2021 and the corresponding period one year later, it recorded a price increase in nominal terms of 12.2% and in real terms of 3.7%.

Overall over the period under review, European countries recorded some of the largest increases in nominal house values. This is partly due to the strong labor market and low lending rates that have prevailed over the past decade, even as mortgages almost doubled across the European bloc, according to the website Visual Capitalist. In terms of growth in real terms, most countries were instead in negative territory, notably in Sweden, Germany and Denmark.

The role of interest rates

Prices in the international housing market soared during the pandemic as central banks cut interest rates to support the economy. Now, however, interest rates have returned to levels last recorded before the global financial crisis. On average, key interest rates have risen by four percentage points in major economies.

Around three-quarters of the countries surveyed by the BIS saw a decline in real house values ​​by 2022. Overall, interest rates have a huge influence on housing markets. In fact, according to Visual Capitalist, the data shows that for every one percentage point increase in prime rates, home prices tend to fall by about two percentage points.

Source: moneyrview.gr