While the surge of recent years might be moderating, experts predict a future with steadier home price appreciation, potentially with some regional variations. Mortgage rates are likely to remain elevated compared to historic lows, impacting affordability for some buyers. However, a gradual increase in housing inventory could offer more breathing room for those still in the market.

Let’s find out some of the expert predictions for the next two years in the US housing market. We’ll explore what’s in store for home prices, mortgage rates, and housing inventory.

Housing Market Predictions for the Next 2 Years: Hot or Not?

Forecast for Home Prices:

Home prices have been a major focus in the US housing market, with many wondering if the upward trend will continue. Experts offer a range of predictions, with some nuance depending on location:

• Modest Appreciation: Many analysts anticipate a shift from dramatic price increases to a more moderate pace of appreciation, potentially around 1-3% annually. This is due to the combined effect of higher borrowing costs and a potential increase in available homes.
• Limited Price Dips: A few experts suggest a possibility of slight price dips in some overheated markets, particularly if mortgage rates continue to climb. However, these declines are likely to be minor and localized.
• Regional Variations: Keep in mind that the housing market isn’t a monolith. Predictions may vary significantly depending on the specific region. Areas with strong job growth and limited inventory could see more stable or even slightly rising prices, while slower-growth regions might experience a more pronounced cooling effect.

Forecast for Mortgage Rates:

Mortgage rates have been a key driver of the housing market frenzy, and their recent rise has significantly impacted affordability. Experts offer some insights into what homebuyers can expect for the next two years:

• Rates Likely to Stay Elevated: The consensus among most analysts is that mortgage rates will likely remain above their historic lows. Predictions range from the mid 6 % to the low 7 % range for the next 24 months. This is due to the Federal Reserve’s efforts to combat inflation by raising interest rates.
• Potential for Fluctuations: While a sustained upward trend is expected, some experts predict there could be periods of slight rate fluctuations. This could be influenced by economic data releases or policy changes by the Federal Reserve.
• Impact on Affordability: Higher mortgage rates will undoubtedly impact affordability for some buyers. However, some analysts suggest this could eventually lead to a more balanced market with increased inventory as some buyers may choose to wait for rates to come down.

Forecast for Housing Inventory:

Housing inventory has been a major pain point for buyers in recent years. Low supply and fierce competition created bidding wars and drove prices up. Experts offer some insights into what’s on the horizon for housing inventory:

• Gradual Increase Expected: Many analysts predict a gradual increase in available homes for sale over the next two years. This could be due to several factors:
  • 1. Shifting Market Dynamics: Higher interest rates may incentivize some homeowners who locked in ultra-low rates to stay put. However, others facing life changes or financial pressures might decide to sell, adding to the inventory.
  • New Construction: While not a major short-term solution, an increase in new home construction activity could eventually contribute to a more balanced inventory level.
• Regional Variations: Similar to home prices, the availability of homes for sale will likely vary by region. Areas with strong job markets and limited housing options might see a slower rise in inventory compared to markets with a cooling housing sector.
• Not a Buyer’s Paradise (Yet): It’s important to manage expectations. While an increase in inventory is a positive sign, it’s unlikely to swing the pendulum completely to a buyer’s market in the next two years. The overall supply is likely to remain below pre-pandemic levels.

For buyers, this could translate to a less frantic buying experience with potentially more time for deliberation. However, competition might still exist, especially for desirable properties.

Predictions for Regional Market Variations:

The US housing market is a complex tapestry woven from numerous regional trends. While national forecasts offer a general outlook, significant variations are expected across different parts of the country. Here’s what experts predict for regional markets:

• Sun Belt vs. Northeast/Midwest: The Sun Belt region (South and Southwest) is likely to see continued growth, albeit potentially at a slower pace. This is due to factors like favorable weather, job opportunities attracting migration, and a larger pool of existing homes. In contrast, the Northeast and Midwest might experience a more pronounced cooling effect, with potentially lower price appreciation or even slight dips in some areas, particularly those with slower job growth.
• Coastal vs. Non-coastal: The affordability gap between coastal and non-coastal areas is likely to widen. Rising interest rates could price out some buyers in traditionally expensive coastal markets, leading to a more balanced market or even price corrections. Conversely, non-coastal areas with a lower cost of living could see continued steady growth.
• Hot vs. Cold Markets: “Hot markets” that experienced explosive price surges in recent years might see a more significant moderation in price growth or even slight declines. Conversely, markets that haven’t seen dramatic price increases might experience more stable or even slightly rising prices, especially if they have strong local economies.

Remember, these are broad regional trends, and specific cities within each region could deviate from them based on local factors like job market strength, new construction activity, and overall housing stock.

Latest Houing Market Snapshot: June 2024

Recent data by N.A.R. provides a clearer picture of the current housing market conditions. Existing home sales faded by 5.4% in June 2024, achieving a seasonally adjusted annual rate of 3.89 million units. This decline represents a significant drop of 5.4% compared to one year prior.

The median existing-home sales price, however, saw a remarkable rise of 4.1%, climbing to $426,900 in June. This marks the second consecutive month that the price reached an all-time high, and it is the twelfth straight month of year-over-year price gains. All four major U.S. regions reported price increases.

Interestingly, the total housing inventory at the end of June rose to 1.32 million units, an increase of 3.1% from May and a substantial increase of 23.4% year over year. This inventory translates to a supply of approximately 4.1 months at the current sales pace, up from 3.7 months in May and 3.1 months in June 2023.

NAR Chief Economist Lawrence Yun noted, “We’re seeing a slow shift from a seller’s market to a buyer’s market.” As homes sit longer on the market and sellers receive fewer offers, buyers are becoming more discerning, often insisting on home inspections and appraisals. This shift illustrates that while prices are rising, the market dynamics are beginning to stabilize.

Tips to Buy & Sell a Home in These Next 2 Years:

Buyers: Conquering the Market in Higher-Rate Times

The rise in mortgage rates presents challenges for buyers, but there are still strategies to navigate this market:

• Get Pre-Approved: Knowing your budget upfront is crucial. Getting pre-approved for a mortgage gives you a clear picture of your affordability range and strengthens your offer.
• Consider Adjustable-Rate Mortgages (ARMs): ARMs offer a lower initial interest rate compared to fixed-rate mortgages. However, be aware that the rate can adjust after a set period, potentially impacting your monthly payments. Carefully evaluate your financial stability and long-term plans before considering an ARM.
• Explore Financial Assistance Programs: For first-time homebuyers, various government programs and down payment assistance initiatives can help bridge the affordability gap. Research local and state programs to see if you qualify.

Sellers: Standing Out in a Shifting Market

As the market cools, sellers need to adapt their strategies to attract buyers:

• Price competitively: Conduct thorough market research to determine a fair and competitive asking price. Overpriced homes are likely to sit on the market longer.
• Enhance Curb Appeal: First impressions matter. Invest in landscaping, minor repairs, and a fresh coat of paint to make your home visually appealing to potential buyers.
• Highlight Unique Features: Showcase what makes your property special. Do you have a beautiful backyard, a recently renovated kitchen, or a desirable location? Emphasize these features in your marketing materials.
• Work with a Reputable Real Estate Agent: A skilled agent can guide you through the selling process, offer valuable negotiation advice, and help you navigate the changing market conditions.

Conclusion: Navigating the Evolving US Housing Market

This new landscape presents both challenges and opportunities. For buyers, careful budgeting, exploring different loan options, and potentially waiting for the right moment is key. Sellers need to adapt their strategies by offering competitive pricing and highlighting the unique features of their homes.

Overall, the US housing market remains a complex system with regional variations and ongoing economic influences. While a cautious approach is warranted, the future isn’t all doom and gloom. By understanding the trends and employing strategic planning, both buyers and sellers can navigate this evolving market and achieve their real estate goals.

Source: Norada

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Whether you’re saving to buy a house, waiting for mortgage rates to fall or planning a big move in the next few years, researching the market now can help you decide where to invest later.

“While no one can predict the market with absolute certainty, the patterns we’re seeing now offer some valuable clues,” said Yawar Charlie, estates director of Aaron Kirman Group at Christie’s International Real Estate and cast member of CNBC’s “Listing Impossible.”

Based on current market trends, GOBankingRates spoke with experts who shared which states to avoid buying property in the next five years and why.

Wealthy people know the best money secrets. Learn how to copy them.

California

Stunning scenery, a vibrant culture and near-perfect weather make California so appealing, but the affordability is an issue.

“As a real estate broker in Los Angeles, I’ve observed some trends that suggest certain states might become less attractive for homebuyers over the next five years,” Charlie told us.

“It’s not just the high cost of living here that’s a problem. The state also struggles with issues like wildfires and droughts, which can make homeownership even more challenging and expensive,” he explained.

“Additionally, the tech boom, especially in areas like the Bay Area, has driven housing prices to astronomical levels, pushing many to seek refuge in more affordable states.”

Rachel Stringer, a Realtor at Raleigh Realty, added, “Demand continues to outpace supply, keeping inventory tight drastically.

“This supply crunch, coupled with slow wage growth, raises affordability concerns over time,” she explained. “As costs rise faster than incomes, keeping up with mortgage payments could become increasingly difficult.”

Florida

For many retirees, Florida is a sunny paradise, but one bad storm can quickly make things a nightmare.

“The state’s location makes it extremely vulnerable to hurricanes and rising sea levels driven by climate change,” Stringer told us.

“Serious considerations include rebuilding costs, disruptions and escalating insurance premiums due to storm damage. Coastal properties may lose substantial value if they become uninhabitable due to rising sea levels.”

Illinois

Known for its big cities and expansive farmlands, Illinois is a major manufacturing center for food, chemicals, rubber products and more.

According to Charlie, though, the state is in trouble:

“Illinois, and specifically Chicago, faces significant financial woes,” he said. “The state has some of the highest property taxes in the country, and Chicago is grappling with a high crime rate and budget deficits, leading to cuts in essential services and increased taxes. These financial strains make it difficult for residents to justify staying when they could find a safer and more financially stable environment elsewhere.”

Louisiana

With its reputation for good times, delicious food and rich culture, Louisiana is a state people enjoy. However, according to Tony Mariotti, founder of RubyHome, you might want to rethink real estate investments there.

“Louisiana is highly susceptible to climate change impacts, such as hurricanes and flooding. These risks can lead to higher insurance costs and potential property damage,” he said.

“The state also struggles with lower job growth and economic diversification, making it less attractive for long-term investments. Infrastructure issues add to the challenges of property ownership here.”

New Jersey

New Jersey is another East Coast state you might steer clear of when buying property.

“Besides the high property taxes, New Jersey is dealing with an exodus of major corporations, which impacts job availability,” Charlie explained. “The state also has some of the highest health insurance premiums in the country, adding another layer of financial stress for residents. Furthermore, the congestion and traffic, especially for those commuting into New York City, can be a daily frustration.”

New York

Another infamously high-priced state is New York, which Charlie revealed has major issues beyond the cost factor.

“Beyond the high property taxes and cost of living in New York City, there’s also the matter of aging infrastructure,” he noted. “The subway system, for example, has been notorious for delays and breakdowns, making daily commutes a headache. Plus, the pandemic has shifted many jobs to remote work, reducing the need to live in or near the city and prompting many to relocate to suburban or even rural areas.”

West Virginia

West Virginia is known as a coal country, but the industry is declining, which has  “economically devastated many parts,” Stringer said. “As jobs dry up, the population drains in these small towns, leaving little demand for housing. Homeowners may struggle to find buyers willing to pay a fair price.”

Source: Yahoo News

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THE first weekend of spring was one of the biggest of the year for auctions, representing a return to form following a lacklustre start to last year’s peak-property season.

Potential homebuyers could have choosen from 2401 properties listed for auction across the nation’s capital cities this weekend, according to data from CoreLogic Australia.

It’s a 5.4 per cent bump on listings from the previous week, making it the third busiest of the year behind the weeks ending 26 February and 2 April, which saw 2429 and 2687 auctions respectively.

It is also a 46.6 per cent jump in the number of listings compared with the start of last year’s spring season, which Corelogic economist Kaytlin Ezzy blamed on weaker selling conditions at the time, including rising interest rates and falling dwelling values.

Chief economist for Ray White Group, Nerida Conisbee, said spring generally sees increased levels of activity on the property market.

“It is where we see a bump in properties for sale generally, because homes look better and people are back from the June-July holiday period,” she said.

“It does generally mean we see more properties coming to sale and buyers come out.”

Ms Conisbee said despite more properties coming to market and interest rates high, prices have failed to pull back as much as could have been expected.

“Even though more properties are coming to market we’re just not seeing a price reduction as a result of that occurring,” she said.

“We did see them pull back very briefly in July, but it was a really tiny reduction and in August it has surged back again.

“If you were a buyer and you were hoping to pick up a bargain, that time has really come to an end and it is looking a lot better for sellers at this point.”

Last weekend, 66.8 per cent of the 2278 homes that went to auction sold, a higher clearance rate than the same time last year.

In Sydney alone, 1010 homes are due to go under the hammer this week, and on average will fetch the highest prices in the country.

Melbourne will host the busiest auction market this weekend, with 1020 homes on the auction block representing a small decline in the number of listings last weekend.

Of the smaller capitals, Brisbane will see the most auction action, with 155 homes listed, followed by Adelaide with 104 and Canberra with 101.

Contributing to the bump in listings is a higher number of investors choosing to exit the market, believed to be partially due to higher interest rates and a lower opinion of landlords generally, according to Ms Conisbee.

“It’s actually quite unfortunate, because landlords do provide 90 per cent of rental homes,” Ms Conisbee said.

“So if we do see a lot of investors selling and those properties go to owner occupiers then we lose them from the rental pool.”

Source : BendigoTimes

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Perth is the most competitive housing market in the country right now and whether you’re buying or renting there’s a shortage of stock on the market. 

With home prices up 10.90% over the past year, Perth is Australia’s top performing capital city market when it comes to price growth.

That’s more than five times the the historic average pace of annual growth experienced in Perth, bringing prices to a record high.

If growth continues at the same pace as over the past quarter, prices in Perth would be set to end the year up 12%.

Perth’s rental market is also challenged. Although the greatest increases in advertised rents over the past year have been seen in Sydney (+18.2% year-on-year), closely followed by regional WA (+16.7% year-on-year) and Perth (+14.9% year-on-year).

The critical lack of available rentals is causing rental prices to increase at a rapid pace.

Buyers and renters competing for fewer homes

Total for-sale listings are currently at historic lows in Perth (on records back to 2004) and total rental listings are also at historic lows.

At the same time, the pipeline of new supply remains constrain

As a result, growth in the supply of new housing is limited at a time when there is already a shortage.

The number of enquiries per rental listing are the highest in Perth (50.3) of any market, illustrating the severe imbalance between rental demand with rental properties in short supply.

To put this into perspective, nationally, the number of enquiries per for sale listing increased 14.1% year-on-year in September but remains below the record high levels seen in late 2021.

In contrast, enquiries per for sale listing in Perth have jumped by 93.9% year-on-year and are sitting at a record high level.

Fewer new listings and faster selling times have driven total for sale listings lower, and there were 25.7% fewer homes listed for sale in Perth in September of this year compared to last.

This strong competition is likely one reason why Perth has overtaken Adelaide as the strongest performing capital city market for price growth over the past year, as buyers compete for limited options.

Limited supply amid strong buyer demand has resulted in a sellers’ market, with prices in Perth outpacing all the other capitals.

Prices in Perth were unaffected by last year’s rate rises, and while prices fell in most markets, Perth avoided the downturn. That stronger growth has continued into this year.

The attraction of Perth

One reason Perth is one of the hottest markets in the country is its relative affordability.

Despite recent gains, Perth housing values remain affordable compared to other capital cities after a decade of underperformance relative to east coast capitals. Darwin is the only capital with a lower median dwelling value.

The PropTrack Housing Affordability Index shows that housing affordability is highest in Western Australia, a factor likely to attract both local, international, and interstate buyers.

Strong population growth is also adding to housing demand, predominantly in the rental market given recent arrivals are most likely to rent. In the 12 months to March 2023, Western Australia’s population grew by 2.8% – the fastest growth of all the states and territories.

Population growth is also driving demand in the market to buy, particularly given the challenging conditions in the rental market that may incentivise some to purchase sooner than they otherwise would have.

The Western Australia government is actively promoting the state as a destination for skilled work regional migrants (491 visas) and has successfully lobbied to have the entire state declared a designated regional area. This means that skilled migrants on regional 491 visas can arrive, live and work in Perth, making it the only capital city which has achieved this distinction.

The outlook for Perth remains challenging with net migration and population growth set to remain strong, with vacancies already historically low.

The comeback state

Western Australia has historically been the most volatile state in terms of economic performance.

Following a period of rapid expansion during the mining boom, Western Australia’s economic growth lay largely in the doldrums until 2019.

But the state is now making a comeback. Buoyed by strong export demand, Western Australia’s economy has grown more rapidly than any other state’s over the past year, with state final demand up 2.8% the 12 months to March.

The city of Perth is booming. Picture: Getty

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Western Australia has one of the lowest rates of unemployment at 3.4%, and one of the highest participation rates.

The strengthening economy, strong demand for labour and prior decade of underperformance relative to the east coast capitals are all likely to be ongoing drivers of Perth’s housing market.

It seems unlikely that these conditions will change any time soon given resurgent population growth, the lack of new home completions and the overall strong demand for housing.

The comparative affordability of homes, population growth, a shortage of housing and very tight rental markets are likely to continue to buoy both home price growth and rental price growth in Perth.

Source : RealEstate.com.au

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Overall, it’s been a troubling key selling season in the US. New home sales were down slightly in June and well below expectations after May’s 15% decline, while transactions for previously owned properties dropped for a fourth straight month.

The lone bright spot in the market is luxury, with homes worth over $1 million the only price category to see sales rise in June, according to the National Association of Realtors. It’s not hard to understand why. With the 30-year fixed mortgage rate hovering around 6.8% after sitting around 3% from late 2019 to early 2022, anyone who has to borrow is paying a significantly steeper price for the same house than they would have just a couple of years ago.

But deep-pocketed buyers don’t have that concern because they can use cash.

“I can’t remember the last time I heard a buyer talk about financing,” said Lisa Rooks Morris, a Sarasota, Florida-based luxury real estate agent at Douglas Elliman. “They all come in with cash.”

The result is a high-end real estate boom that’s sending the stock market’s biggest US luxury homebuilder to new heights. Toll Brothers Inc. posted stronger-than-expected orders in its fiscal second quarter earnings report in May and ratcheted up its full-year deliveries guidance. The company’s shares are trading near a record after a roughly 160% rise since the start of 2023, making them the sixth biggest gainers in the S&P Midcap 400 Index over that time and making the company the second-best performing publicly traded US builder in the past six months.

“Historically, higher priced homes are the first to feel the hit when interest rates rise,” said Ali Wolf, chief economist for Zonda. “We aren’t seeing that today. High home equity and the strong stock market have acted as a buffer against interest rates for wealthier Americans.”

As of the end of the first quarter, 45% of US high-end homebuyers used all cash, the largest share in at least a decade, according to data from Redfin. Well-padded stock portfolios, sales of long-term holdings in commercial real estate properties and newly inherited generational wealth are all popular sources of funding.

By contrast, entry level buyers depend on their personal savings and incomes, which haven’t kept up with inflation. And for lower-income borrowers the problem goes beyond rising mortgage rates to simply getting approved for a loan, as delinquencies on credit cards and auto loans climb.

“The bifurcation we’re seeing in the housing market is emblematic of the wider bifurcation we’re seeing in the economy,” Nationwide senior economist Ben Ayers said. Asset values in the US are surging, and “while many folks are cashing in on that, on the other end of the spectrum, people are just getting by.”

Well-heeled buyers are returning to the pandemic boomtown Black Diamond more than 30 miles south of Seattle, Washington. At The Regency at Ten Trails, a Toll Brothers’ active adult community in the former coal mining town, prices start at $600,000, but the most popular models go for more than $1 million and have about 2,000 square feet (186 square meters). More than half of the buyers are paying cash, according to Toll Brothers, and sales agent Kristi Brewer says she’s noticed the uptick in demand in the past few months.

Across the country in Florida, Morris sold a $7.75 million newly-constructed home earlier this year just 72 hours after listing it. The difference between now and the Covid frenzy, she said, is an excess of quality inventory.

“Now you have the time to actually contemplate, shop and negotiate,” Morris said, which many buyers weren’t able to do during the pandemic bidding wars.

The need for lower cost housing isn’t lost on the homebuilding industry. The challenge is how to do it in an environment where the cost of just about everything that goes into constructing a house is higher than it was.

For example, the active-adult segment is growing quickly for Houston-based David Weekley Homes, one of the nation’s largest privately held builders. But the company is having a hard time producing homes it can sell for less than $400,000 due to the rising cost of land, labor and materials, according to president Chris Weekley.

“Every builder is trying their own push into more attainable homes,” Weekley said. “But the risk, as we do that, is that the one way to get cheaper land is to go further out. And that’s a riskier bet.”

Meanwhile, the pool of potential buyers with money in their pockets is deep — 39% of homes in the US didn’t have a mortgage as of 2022.

“Higher-end buyers are doing this with cash,” Zonda’s Wolf said.

Source

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Spillover?

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PLUNGING US home sales are having a ripple effect on consumer spending, as fewer Americans are moving into houses that need to be outfitted with furniture and appliances.

The effects are visible across the economy. Spending on furniture and related items fell nearly 12 per cent from the year-earlier period in October. Home goods sellers including Z Gallerie and Serta Simmons Bedding have filed for bankruptcy this year, citing weaker demand, and more are probably coming. Williams-Sonoma’s chief executive said last month that consumers are hesitant to spend on expensive furniture. Home Depot, the hardware and appliance store, said its revenue will likely drop this fiscal year.

The Federal Reserve last year started a rate hiking campaign to tame inflation, and slowing the housing market is a key way to make that happen. In October, mortgage rates reached their highest level since 2000, helping to make housing the least affordable since at least the 1980s.

On Thursday (Nov 30), the effects of low affordability became even clearer: a gauge of pending sales for existing homes reached its lowest level since the measure started in 2001. Home loan rates have started drifting lower amid growing hopes the Fed will start to expand the money supply again next year, but it could take years for the housing market to return to normality.

“It’s just less affordable to buy a house today than it was a couple of years ago when rates were much lower, and that’s closed out a certain amount of spending that would have otherwise happened,” said Jack Kleinhenz, chief economist at the National Retail Federation.

The average household shells out US$8,000 more on home-related goods and improvements in the two years after a home purchase, according to a study published last year by professors including Efraim Benmelech at Northwestern’s Kellogg School of Management.

Falling revenue

Without that expenditure, retailers are feeling the pain. Williams-Sonoma, owner of Pottery Barn, estimated last month that its revenue will fall as much as 12 per cent this fiscal year. Ethan Allen Interiors, a maker and seller of furniture, posted a 24 per cent decline in sales in the latest quarter, due in part to slowing demand.

Some firms have struggled to navigate the broad decline in consumer expenditures. A series of companies that provide home furnishings have sought bankruptcy protection this year, including Z Gallerie, Mitchell Gold + Bob Williams, and discounter on Tuesday Morning. Pillow maker Pegasus Home entered bankruptcy in August, mattress wholesaler Serta Simmons did so in January and the photo frame seller NBG Home sought protection in February.

“From a creditor and trade vendor perspective, there’s concern in the industry,” said Jordana Renert, a partner in the bankruptcy department at law firm Lowenstein Sandler, referring to investors in stores that sell decor. “Until new home purchases pick up or mortgage rates decrease, I think the home-goods furniture industry may continue to see a pause in consumer spending and an increase in chapter 11 filings.”

With mortgage rates having risen as much as they have, it’s not clear when home purchase volume will resurge. Many homeowners are unwilling to sell, in part because that means letting go of the cheap mortgages they locked in during the pandemic. That’s translated to relatively more of the transaction volume coming from new home sales, where developers are looking to offload homes they’ve built.

More than 60 per cent of US home loans have rates below 4 per cent, according to data from Black Knight, while the latest 30-year Freddie Mac mortgage rate is closer to 7.2 per cent. On average, a 1 percentage point increase in mortgage rates relative to where borrowers have locked in leads to a 9 per cent decline in the rate at which people move houses, according to a study by professors including Julia Fonseca at the University of Illinois Urbana-Champaign. If a homeowner, for example, were thinking about changing jobs, the new position would have to pay much more for the consumer to be willing to give up their mortgage.

“Lock-in can prevent households from pursuing labour market opportunities that would have been worthwhile otherwise,” Fonseca said.

Homebuilder pressure

Lofty interest rates are not only crimping activity on the demand side, they are also pushing up prices on the supply side of the market and are threatening to keep them elevated for some time, said Robert Dietz, chief economist at the National Association of Home Builders.

The interest rate that homebuilders are paying to finance the construction of single-family homes is close to 13 per cent, Dietz said, and material costs have risen alongside inflation. That has made it more difficult for builders to break ground on new homes now, which could squeeze supply for two to three years. The impact could be felt across the economy for some time, according to Dietz.

“If you take all the challenges in the housing market and think of them almost as taxes on new housing supply, those taxes are restraining economic growth,” Dietz said. BLOOMBERG

Source : TheBusinessTimes

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Rescue measures intended to coax mainland Chinese to purchase residential property in Hong Kong have failed to woo buyers, as the financial hub’s property market slump deepens.

It comes six weeks after Hong Kong Chief Executive John Lee tweaked official housing policy, lowering purchase duties and weakening disincentives against quick resales.

“My WeChat has been buzzing with inquiries from [Hong Kong-based mainlanders] about the specific [changes], but not a single one is interested in viewing properties,” said a real estate agent surnamed Pan, who has some two decades of experience in Hong Kong.

For the past five years, Pan has focused on so-called Hong Kong drifters, a mostly professional class who plan to be in the city long term and lack permanent residency but may be working toward it. Hong Kong is thought to be home to about 350,000 such people.

On Oct. 25, the chief executive delivered his second policy address, an annual speech that sets the political agenda in the city. Lee adjusted a regime of property controls intended to keep a lid on prices that dates back to the global financial crisis. Two key stamp duties that previously added 30% to a purchase price would be cut in half, he said.

Lee also beefed up talent incentives, announcing certain professionals that move to Hong Kong would not need to pay stamp duty so long as they subsequently obtained Hong Kong permanent residency (HKPR).

For long-term renters from the Chinese mainland, it should all have been good news. But Caixin has found that despite an uptick in the city’s new residential transactions, many still remain hesitant to buy.

“Mortgage rates are too high right now,” said Chen Yuan, a financial services professional who has worked in the city for six years. “There’s no good reason to take out a loan during a property market downturn.” Chen said turbulence in her industry, where her husband also works, was a key factor in their decision to put off buying a house.

Hong Kong’s property market continues to slump as rates rise and capital flees in search of safer investments like fixed deposits. The uncertainty has dented confidence as more potential buyers adopt a wait-and-see posture. A recent UBS report predicts the drop in property prices will reach 5% this year and accelerate to 10% in 2024.

Hong Kong’s property prices remain some of the world’s highest. They rose continuously, with occasional short-term corrections, from the global financial crisis of 2008 up until a historic annual decline in 2022. But the recent shift, and the absence of a sustained post-pandemic bounce, has many investors asking where the market is headed and what a recovery will look like.

Less than expected

Lee’s changes announced in the policy address fell short of market expectations. “This is not even half of what was expected,” said Joseph Tsang, chairman of the Hong Kong branch of global developer giant JLL.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” Lee said in his address.

He said an expected increase in housing supply in the near term justified easing the measures intended to cool demand. Those measures include three taxes on property sales: the special stamp duty (SSD), the buyer’s stamp duty (BSD) and the new residential stamp duty (NRSD).

Lee said that from Oct. 25 buyers would only need to wait two years before reselling if they wanted to avoid an SSD of 10%. Previously, homeowners were required to wait three years if they wanted to avoid the additional tax.

A continued rise in mortgage rates has discouraged potential buyers from entering Hong Kong’s property market.   © Reuters

Long an attractive place for mainlanders to park their money and hedge against risks closer to home, Hong Kong’s speculative inbound capital had nonetheless come in waves. A key instance was after the 2008 global financial crisis, when quantitative easing made the city’s property market an attractive proposition. The SSD was introduced in 2010 in part to combat that. The BSD followed in 2012 as a tax on purchases by non-HKPRs.

In his October policy speech, Lee also announced that the BSD and NRSD would be cut in half to 7.5%. The change was intended to ease the financial burden of housing purchases on HKPRs and non-HKPRs alike, he said.

Finally, a refundable upfront payment of the BSD and NRSD would be scrapped for “inbound talent,” meaning incoming professionals who eventually obtained HKPR. Lee said this was an “enhancement” of the refund arrangement, introduced last year, under which the cohort did have to pay the duties up front, but were entitled to a refund after they had lived in Hong Kong for seven years and obtained HKPR.

Rosanna Tang, executive director and Hong Kong head of Research at Cushman & Wakefield, said the new stamp duty exemptions for incoming talent were in line with the government’s broader efforts to remove barriers for individuals interested in developing their careers in Hong Kong.

Market carnage

Last year, Hong Kong’s preowned home price index fell 15.6%, with transaction volumes falling nearly 40%. Then, in the first four months of 2023, the property market experienced a rapid recovery after the border reopening with the mainland. From January to April, its preowned house prices rose for four consecutive months.

It would not last. According to data from Cushman & Wakefield, there were less than 9,200 housing sales in the third quarter of 2023, 25% down on the prior quarter and 21% down on the prior year. Edgar Lai, a senior director of valuation and advisory at Cushman & Wakefield in Hong Kong, told press that the third quarter, usually peak transaction season, was the worst he had seen in more than 20 years in the industry.

The strong stock market rebound at the end of 2022 also petered out. Hong Kong stocks have been hemorrhaging since then, disrupting the traditional investment approach of making money on the stock market and investing it in property.

Meanwhile, the continued rise in mortgage rates has discouraged potential homebuyers from entering the market. The U.S. Federal Reserve began a round of successive interest rate hikes from near zero at the beginning in March 2022 to a range of 5.25% to 5.5% in September this year.

Facing the high cost of funds, several major commercial banks in Hong Kong started to raise their prime lending rates for mortgage loans in September 2022. After the latest hike in July 2023, HSBC, Bank of China and Hang Seng Bank currently have a prime rate of 5.875%, representing a cumulative increase of 0.875 of a percentage point. Smaller banks such as Bank of East Asia and Citibank have raised their prime rate to 6.125%.

Meanwhile, Hong Kong’s tourism and retail sectors recovered less than expected following the city’s reopening. Locals cleared out in favor of tourist destinations abroad. Dampened by the sputtering Chinese economy, few inbound tourists replaced them. In the first eight months of 2023, only 20 million tourists visited Hong Kong, less than half as many as in the comparable period of 2018.

Sellers quick to offload

As U.S. interest rates remain high, the interest on Hong Kong dollar fixed deposits continues to rise steadily. Major banks have all raised their three-month fixed deposit rates to 4.5%, with some smaller banks offering more than 5% interest on large fixed deposits.

Timed deposits, which tend to offer lower returns than stocks and bonds and lack flexibility, have become the de rigueur place to park cash from a housing sale.

Meanwhile developers are struggling with unsold inventory. According to data from Centaline Property Hong Kong, unsold inventory of new private residential properties surged to 20,483 units in the third quarter of 2023, reaching a near 20-year high.

In fact, since the second half of this year, the market has seen a number of residential properties at lower prices. In early August, CK Asset Holdings, the property flagship of Hong Kong billionaire Li Ka-shing, sold its Coast Line II project in Yau Tong at a discounted price, causing a stir in the primary market.

Road to recovery

In the six weeks since the changes, the transaction volume of new residential properties has noticeably rebounded, but the downward trend in property prices continues.

Between Oct. 25 and Nov. 25, the transaction volume of new residential properties was up by around 2.8 times month-on-month, reaching 678 transactions, according to Centaline.

Meanwhile, an index for private flats from the Rating and Valuation Department fell by 2.2% month-on-month in October, marking the sixth consecutive monthly decline.

While the uptick in new housing sales may be related to the policy changes, it could also be down to developers aggressively promoting the sale of new properties at low prices, analysts said.

Derek Chan, head of research at Ricacorp Properties, believes low-cost launches by primary developers will continue to put pressure on preowned home prices.

Chan predicts that with a significant inventory of new residential properties, developers will continue to adopt a “quantity before price” strategy with low-priced launches in December. As a result, homeowners seeking to resell will need to do so at lower prices. He expects Hong Kong property prices to decline by 7% for the full year.

Ken Yeung, head of property research at Citi in Hong Kong, predicted that an improvement in economic conditions and interest rate cuts next year could see Hong Kong property prices bottom out in the first half of 2025.

Source : NikkeiAsia

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A key player in the housing market has said it expects asking prices to track around 1% lower nationally by the end of next year, as the market continues to normalise after post-Covid freneticism.

Sellers will likely have to price more competitively to secure a buyer next year and agents will have to work harder especially when it comes to first-time buyers as affordability remains stretched, according to Rightmove (RMV.L).

“The housing market is made up of thousands of local markets, each with their own unique dynamic of supply and demand,” said Rightmove’s property expert Tim Bannister. “In areas with more discretionary sellers and fewer homes for sale, we may see new seller asking prices remain flat, or even very slightly increase compared to this year.”

The platform thinks mortgage rates will become more predictable — but remain high, meaning middle-market and lower end buyers will struggle. The average two-year fixed rate is now 5.52% and average five-year rate is 5.11%.

The real estate platform used a predictive model to forecast, based on millions of supply and demand pricing data, as well as a panel of experts.

A year ago, it predicted average new seller asking prices would drop by 2% in 2023, and they are currently 1.3% lower year-on-year.

Looking back at this year, the average time for a seller to find a buyer has jumped from 45 days to 66 days. Meanwhile, some monthly price falls have been greater than the usual seasonal trends this year.

The level of price reductions has increased during 2023, with 39% of properties now seeing a price reduction during marketing compared to 29% last year, and 34% in 2019. New sellers will need to compete with their cut-price neighbours, and work with their agent to start their marketing with a competitive price, rather than starting too high and needing to reduce later.

Research shows that pricing right at the outset maximises the initial impact among local buyers and gives new sellers a much greater likelihood of a successful sale.

Buyers are much more likely to see a choice of homes for sale in their area that suits their needs compared to the stock-starved pandemic years, Rightmove said. Buyers coming to market in 2024 are in a strong position to negotiate on price and take more time to choose the home that’s right for them.

However, the number of available homes for sale has only just increased to pre-pandemic levels and there are no signs of a wave of new listings which would create a glut of homes for sale. With more choice and fewer buyers on the ground, it will be those sellers who are willing and able to price temptingly who will attract buyer’s attention.

Meanwhile, UK house prices rose in November in the third consecutive monthly increase as the market now expects interest rates to start coming down. The average cost of a home rose 0.2% in November from the month earlier to £258,557, Nationwide Building Society said on Friday. From a year ago, prices fell 2%, which was the strongest reading in nine months.

Earlier last week Zoopla published its house price index for November showing houses were being sold at steep discount. In London properties are selling for £25,000 less than the asking prices, while in the rest of the country sellers were lowering prices by £18,000.

Source : YahooFinance

The post UK House Prices Predicted to Fall in 2024 appeared first on Amora Escapes.

Melbourne house prices are tipped to rise up to $37,000 in 2024.

But a landlord exodus driven by rising state government taxes that is part of the reason more homes have hit the the market than in any other city over the past year will see the city lag behind almost every other capital.

The PropTrack Property Market Outlook Report has forecast 1-4 per cent for the city’s property market in the next 12 months that could bring the median house price to more than $950,000.

PropTrack economic research director Cameron Kusher said while Melbourne was expected to attract less home price growth than Sydney, Brisbane, Adelaide and Perth, it could potentially double the about $17,000 (1.9 per cent) growth the Victorian capital unexpectedly notched in 2023. They had been forecast to decline 7 per cent this year.

Mr Kusher said despite the fastest increase to interest rates since at least the 1990s, rising costs to build new homes and Victoria accounting for a substantial portion of the nation’s incoming migration would combine to drive home values up.

“The fact we are at or near peak interest rate levels could see more people looking to buy next year,” he said.

Home price growth is on the cards in 2024, but Melbourne will lag behind other capitals.

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While the Outlook report has flagged a tough year for first-home buyers around Australia, Mr Kusher said record-low rental vacancy rates could drive some of them to find a way to buy a home and escape from increasingly uncertain tenancies.

Ironically, their chances might be improved by landlords selling off rental homes at an accelerated level this year, as Melbourne has more homes for sale than any other capital in part thanks to their exodus.

“There are quite a lot of investors looking to exit Melbourne and Victoria because there are quite a lot of taxes,” he said.

From next year, investment property owners will be hit with increased land tax costs as the state government implements a series of levies to try and recoup Covid-era budget losses.

Real Estate Buyers Agents Association of Australia Victorian representative Luke Assigal echoed the landlord sell off commentary and said he expected the trend could be even more pronounced as planned new taxes on investment and secondary properties came to fruition in the new year.

Homes like 2 Cunneen St in the Bendigo suburb of Long Gully could be set for price gains in 2024. The home is currently listed for $440,000-$480,000.

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Speaking as part of REBAA’s end of year analysis for 2023, Mr Assigal said he believed even an uptick in investor sales next year wouldn’t slow the market and predicted there could be as much as 6 per cent growth — about $55,000 for Melbourne’s $917,000 median-priced home.

But he said the fate of first-home buyers in the new year could rest with the Australian Prudential Regulation Authority, who he said could price many back into the market by reducing assessment rates for home loans from the current 3 per cent above the home loan rate of the day.

An interest-rate cut could also drive demand, and Mr Assigal said either scenario could make Melbourne’s undervalued far west, from Werribee to Hoppers Crossing, and outer northern suburbs, like Epping, hot property.

He added that regional areas around Ballarat, followed by Bendigo and Geelong, could also benefit from squeezed homebuyer budgets.

Source : RealEstate.com.au

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