Bloomberg title: Global meltdown (via email)
By: Alice Kantor
Date: 2 August 2022
“Housing slowdown? Try a possible global meltdown.
As economies flash recession signals, cracks are forming in housing markets that surged in the first years of the pandemic.
In New Zealand, which has been the world’s frothiest real estate market, prices are plunging and homes are sitting on the market for longer, a possible sign of what’s to come in other places as central banks fight inflation and consumers get squeezed by higher prices.
It’s a similar story in Canada, another market that’s run hot for two years. Bidding wars are waning as sellers scramble to navigate a sudden downturn. And in the US, some Americans priced out of the domestic market are looking to another continent for their home purchases.
Despite the turmoil, and fears that prices will plunge if or when a recession hits, Brits have kept buying real estate at high prices. Never mind the climbing mortgage costs.
The US has at least one advantage: a strong currency. The dollar recently reached parity with the euro, making real estate in Europe about 16% cheaper than what it was a year ago for Americans, according to Knight Frank estimates. This has US buyers flocking to France, southern Italy and Spain to buy property.
While the current housing cooldown might not end up as a global real estate meltdown, costly mortgages and stubbornly high home prices could push households into greater debt, spurring reduced spending and potentially fueling the next global economic downturns.”
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