© Reuters. FILE PHOTO: A construction site for residential buildings is seen during the coronavirus disease (COVID-19) outbreak in Detroit, Michigan, United States on April 28, 2020. REUTERS / Rebecca Cook
From Shrutee Sarkar
BENGALURU (Reuters) – Housing markets in major economies are set to skyrocket this year on the back of tremendous monetary and fiscal support and the recovery from the pandemic, according to Reuters polls that showed risks to upward prices.
In some countries, average home sales prices reached staggering levels in 2021. This trend is expected to continue, driven by low mortgage rates, rapid vaccine launches, and the easing of restrictions after deep pandemic-triggered recessions last year.
The global boom in property prices is accompanied by soaring stock markets that quickly recovered from a collapse of pandemic economic damage and devastating job losses to focus on unprecedented momentum and the impending recovery.
Reuters polls of more than 100 real estate experts from May 11-24 showed that house price projections for the US, UK, Canada, Australia and Dubai have improved significantly from just three months ago, and expected GDP growth and consumer price inflation surpassed.
“Consumer confidence has risen sharply on the success of vaccination programs, and survey results suggest the pandemic has resulted in more people moving home. Supply shortages suggest upward pressure on prices in the short term,” said Andrew Harvey, senior economist at nationwide.
Nearly 60% of analysts, or 55 out of 92 who answered a separate question about real estate markets around the world, said the risks to the outlook had been moved up for the coming year. The remaining 37 said more downward.
Graphic: Reuters survey graphic on the global real estate market outlook, https://fingfx.thomsonreuters.com/gfx/polling/xegpbdxbapq/Global%20graphics.PNG
The trend in recent Reuters polls showed that strong gains are expected this year, followed by a slower appreciation over the next few years, mitigated by higher supply, lower immigration and increasing affordability restrictions.
While there was a higher demand for single and multi-family houses in cities and municipalities, the respondents were divided when they were asked how the demand for office space would continue to change in the next few years.
Forty-one out of 78 respondents said it would decrease, including five who said a significant decrease, while the remaining 37 said demand for office space would increase, including two who said a significant increase.
“The forced remote work experiment of the past few months will dramatically shift demand in the office space. Up to 50% of office workers work from home at least once a week,” said Matthew Pointon, senior property economist at Capital Economics.
“Even if there was a heroic response to the offer through extensive renovations and demolitions, we expect vacancies to rise significantly over the next five years and to continue to increase by 2030.”
INDIA TO MISS BOOM TIMES
House prices in Australia and Canada are likely to see double-digit growth this year, while in Dubai they are likely to rise for the first time in six years.
The UK property boom should continue due to continued government support and increased demand for more housing.
US house prices were expected to race forward, rising twice as fast as they did in February, due to low supply and high spending by the White House government, and near-zero interest rates.
“Unexpected demand during the pandemic and chronically strained inventory levels have pushed house prices well above levels justified by underlying fundamentals such as employment and income,” said Gregory Daco, chief US economist at Oxford Economics.
The outlook for the Indian real estate market has been a notable exception to the global trend.
Indian property prices have been predicted to stagnate this year, hurt by a devastating second wave of the coronavirus that has dampened demand and offset government tax breaks and incentives for property developers.
According to a Reuters tally, India is currently responsible for one in three coronavirus-related deaths reported worldwide.
“The normality of mobility and housing would remain subdued for the next 18 months. But the larger problem of income and jobs also remains subdued,” said Ashish Nainan, assistant professor at Saintgits, of the Indian market.
“While the first wave gave the sector some relief, after the second wave buyers became fence sitters for a longer period of time.”