The outlook for significant global housing markets looks subdued, with high unemployment from the coronavirus pandemic and lockdowns and low immigration the biggest hurdles over the coming year, according to a majority of analysts polled by the Reuters news agency.
With several risks still at play, house prices in Australia, India, Dubai, Britain, Canada and the United States were forecast to fall this year and next under a worst-case health and economic scenario.
The coronavirus has killed more than 480,000 people worldwide, infected about 9.3 million and left many millions jobless. It has also pushed the global economy into a deep recession with the rebound expected to be slow and long as the pandemic still spreads in stages.
The slump has come despite an unprecedented amount of fiscal and monetary stimulus, sparking a rally in stock markets from late-March troughs, along with steady reopenings of many economies from lockdown.
While average home prices in a few countries polled were forecast to rise this year or next or both, fears of a prolonged drop in transaction activity increased in the June 9-24 global poll of more than 100 property market experts compared with just three months ago.
“Our general view is that prices across most major markets will fall, probably around 5 percent … and in some it could be more significant,” said Liam Bailey, global head of research at property consultancy Knight Frank in London.
“The risks are to the downside. The big thing that we don’t know is the potential for a second outbreak and lockdown. And if we get another significant lockdown, then there is every chance that prices would fall again.”
The US housing market, at the epicentre of the 2008-2009 financial crisis that led to a global recession, was expected to remain a bright spot and defy the economic downturn, with prices supported by record low mortgage rates and limited supply.
While the availability of affordable homes has been a chronic problem there for several years, the main risk is unemployment, which has jumped from record lows to record highs within a couple of months and is expected to remain well above pre-COVID levels until at least 2022.
High joblessness is the biggest hurdle housing markets will face over the coming year, according to two-thirds of the more than 100 analysts across the countries surveyed. More than 10 percent said lower immigration would dampen housing markets.
“Rising unemployment and the risk of redundancies is likely to have a negative impact on the housing market over the coming months. Many people will choose to put off any major financial decisions, including buying or selling a house, until they are clearer on their income security and the economic outlook has improved,” said Jamie Durham, an economist at consultancy firm PwC in London.
“The impact on the housing market is likely to be felt disproportionately in areas with large hospitality and tourism sectors, which have been most affected by the virus.”
More than 80 percent of nearly 100 respondents said the recovery to pre-COVID-19 levels would be “gradual,” or “slow and long.” The rest said it will be quick or that it already has.
Unemployment, low confidence, second wave
Indian and Australian house prices were forecast to fall this year and next due to higher unemployment, while weak consumer confidence and fears of a second wave of infections have dampened chances for a sustainable rebound in China.
British home prices were forecast to fall this year. In Canada, they were expected to rise at a much slower pace than predicted three months ago and fall next year, with high household debt becoming a challenge.
“Supply [of homes] will increase when public emergency payments end as certain households will face higher debt payments as a result of mortgage payment deferrals,” said Marc Pinsonneault, senior economist at National Bank of Canada in Montreal, noting an additional risk to outright job losses.
“Add to that those who used to list houses on the Airbnb platform and could not rent them because of international travel restrictions. Some might also [just] want to sell.”
Migration to the suburbs from city centres, as more people become accustomed to working from home and who can seek space and gardens, might ease some housing shortages in major urban areas.
Slightly more than half of 72 analysts who answered an additional question predicted a move out of major cities in the medium to long-term.
“It will be fine-tuning rather than mass-exodus,” said Miles Shipside, director at UK property website Rightmove. “Cities are convenient as the commute is shorter, but access to outside space and space internally are bigger factors. That might mean finding that in cities, or moving further out.”