Housing Affordability Will Decrease in the Near Future
September 03, 2021
8
The situation with buying a first home will only become more complicated for young buyers.
The staggering pace of house price growth in most major global markets since the start of the pandemic has probably peaked. But accessibility will not improve in the next few years, and perhaps it will even get worse, according to the Reuters survey.
More than 100 real estate market experts attended the Reuters survey, that was conducted on August 10-25 and covered eight key markets: the United States, Canada, the United Kingdom, India, Australia, New Zealand, China and Dubai. As a result, most experts agreed that price growth will slow down over the next two years.
But with most central banks expected to keep rates at record lows over the next year, house price inflation will still easily outpace wage growth.
Combined with rising material prices and a lack of supply of affordable homes in many markets even before the pandemic changed consumer preferences, home prices are almost certain to continue to rise. This means that for the majority, especially for young people who want to buy their first home, the situation will only get more complicated.
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THE GENERATOR
When asked how housing affordability will change over the next few years in the analyzed markets, almost half of the respondents (49%) said that the situation will only get worse. Overall, about 80% think that it will worsen or remain approximately the same.
House prices in the United States, Canada, Australia and New Zealand are projected to rise by double digits this year, and then slow to single digits in 2022. But in China and the UAE, the rise will not be so rapid.
Almost 40% of analysts who answered an additional question said that the biggest risk of lowering their forecasts was the refusal of central banks to stimulate during the pandemic. In second place is the spread of new variants of the coronavirus. 18 analysts reported a slowdown in economic growth, five - a supply chain disruption, four - high unemployment and only two believe that a return to full-time work will be the biggest risk for the housing market over the next 12 months.
"It is clear that there are many cross-currents in the housing market today, affecting volatile long-term interest rates, low affordability, labor and land shortages, as well as scarce stocks," said Scott Anderson, Chief Economist at Bank of the West.
"We predict that housing market activity will gain a more stable pace over the next 18 months."
If this is true, then the trend will not weaken in the coming years until more homes are built. But even with the current low pace of housing construction in most markets, the cost of building materials, labor and lumber is more likely to rise than fall.
