Buying a house is a major life moment, but can also produce major stress. Various studies and my recent first-hand experience attest to it. There are countless details to be sorted to make the space livable. The fact that our investment has been growing steadily in value from the time we closed the deal last year has been pleasing. But our satisfaction has been tempered by the hit from rising mortgage rates.
While the housing market remains resilient in India, that’s not been the case in several advanced economies. After years of steady gains, the global property market has pulled back sharply since mid-2022. Housing starts, permits, sales and prices have been trending downward in most G10 economies, with little sign of bottoming out yet.
Real home prices in Canada fell for nine straight months last year, with a peak-to-trough loss of 19% since the first quarter of 2022. Over the same interval, large corrections are evident in Sweden (-22%), New Zealand (-21%), Australia (-12%) and the U.S. (-4%). In the U.K., property prices are down by about 5% after peaking last August.
Tighter monetary policy and the accompanying sharp rise in mortgage rates have pushed many housing markets into steep downturns. Policy rates have increased an average of four percentage points across major economies, to levels last seen prior to the 2008 global financial crisis. The average 30-year fixed rate mortgage in the U.S. rose to a two-decade high of 7.1% late last year. Though down from the highs of October 2022, mortgage rates in the U.K. are still well above the levels seen before the pandemic.