Global real estate prices are falling, especially in more advanced economies. Bank of International Settlements (BIS) data shows real home price growth was negative for most markets in Q2 2023. The same advanced economies that saw the largest growth post rate cuts, are now leading the way lower. They also appear to be struggling with recovery, which has proven less of a challenge for emerging market economies.
Most Economies Are Seeing Home Prices Fall
Most of the world has seen real residential real estate values drop, but advanced economies saw a bigger impact. About 80% of advanced economies saw year-over-year price drops in Q2. In contrast, 60% of emerging market economies saw negative price growth.
Source: BIS.
Advanced economies are also seeing deeper price drops and they tend to be stickier. The aggregate of advanced economies showed y/y growth of 4.7% in Q2, more than 9x the decline observed in emerging markets. Emerging markets have also bounced back towards growth (but not quite) a lot faster since hitting their trough.
The above chart may also indicate this trend is in response to the size of home price growth post-2020 rate cuts. The peak of y/y price growth is significantly higher than that seen in emerging markets. They also happen to be significantly greater than any historical peak, surpassing the trend seen before the global financial crisis.
Home Prices Are Falling Sharply In G20 Countries
So where have the biggest hits to home prices been observed? Isolating the G20, the BIS research shows Hungary (-15.6%) saw the biggest annual drop. It was followed by Germany (-15.5%), and Sweden (-15.2%).
Source: BIS.
The drop for real home prices in Canada managed to rank amongst the largest observed. However, with an annual decline of 11.7% in Q2, it was more tame in contrast.
Not all G20 countries have seen prices fall though. Massive annual growth was observed in Turkey (+39.5%), which is leading on the way up. It was followed by the UAE (+12.9%), and Greece (+11.2%) which also managed double-digit real growth despite inflation issues.
Global real estate prices have generally boomed since pandemic-related rate cuts. A previous report from the BIS attributed this boom to central banks holding rates too low for too long, also contributing to the general inflation crisis. Now that rates have increased to balance inflation, home prices in most economies are rolling back. They still have a long way to go before balancing out the recent exuberance though.
MONEY LAUNDERING IN REAL ESTATE
A long-awaited rule targeting money laundering through the U.S. real estate market is likely to be proposed in early 2024, according to the U.S. Treasury Department. The rule may require real estate professionals to report the beneficial owners of companies that buy properties in cash to the Financial Crimes Enforcement Network, Reuters reported.
The Canadian Market Place isn’t immune from money laundering in real estate. Affordable housing might become self-correcting if the Provincial governments get their act together, especially in destination Cities.
Notice it is often just the immigrants to Canada who were sucked into paying too much by other past immigrants that think prices for homes grow to the the sun without realizing that the USA prices are one tenth the cost in a population ten times that of Canada.