–
–
In neighborhoods like Manastirski Livadi, the need for garages and parking lots is so great that the prices of such properties are growing faster than the prices of the homes themselves. PHOTO: “24 HOURS”
–
Housing prices have risen sharply in almost all major economies since the coronavirus pandemic, reaching the biggest jump in more than two decades and reviving concerns about the economy over potential threats to financial stability.
Of the 40 countries included in the Organization for Economic Co-operation and Development (OECD) data, only three reported declining house prices in real terms in the first three months of this year.
Historically low interest rates, savings saved during the blockades and the desire for more space as people work from home stimulate the trend, analysts say.
In the short term, rising house prices could be “a good thing for the economy, as people who already own a home feel richer and can spend more on valuing their assets,” said Claudio Borrio, head of monetary affairs. and the Economic Department of the Bank for International Settlements – the Bank of Central Banks.
But if it persists, it could turn into a volatile boom that could eventually push activity “in the opposite direction,” especially if accompanied by strong credit growth, Borio warns.
In the first quarter of 2021, house price growth in OECD countries reached 9.4% on an annual basis – the fastest rate in 30 years. This is happening against the background of economic growth after the severe recession last year due to the coronavirus.
Dennis Egan, deputy director of the IMF’s macrofinance division, noted “strong house price growth in the last year in most parts of the northern hemisphere.”
Data at the national level show that the broad trend continued in the second quarter. In the United States, house prices rose at their fastest annual rate in nearly 30 years in August.
Strong growth continues in the UK, South Korea, New Zealand, Canada and Turkey.
Some countries are showing signs of “housing fever,” said Enrique Martinez-Garcia, a senior economist at the Dallas Federal Reserve. He attributes the development of fiscal and monetary incentives during the pandemic.
Why are prices rising?
“Extremely favorable financial conditions” with record low interest rates boost housing prices at an unusually fast pace during a period of weak economic activity, Borio said.
Low interest rates make home purchases more affordable than rents and other investments. In addition, many households, especially the wealthier ones, have accumulated large savings since the start of the pandemic, as the blockades have limited spending and at the same time some jobs have been protected.
“A lot of the extra revenue goes to the housing market,” says Martinez-Garcia.
At the same time, more people have decided to change their home, often for a bigger one in quieter places, after long hours at home during the blockade. They have focused on real estate markets, which are already suffocating with the accumulated demand from households that are postponing their relocation.
This situation is “exacerbated by the lack of supply and rising prices of construction materials,” said Matthias Pleisner, an economist at rating agency Scope Ratings. Housing stocks are shrinking as global supply chains come under pressure and the cost of materials such as steel, wood and copper rises rapidly.
Brett House, deputy chief economist at the Canadian bank Scotiabank, warns of a “structural imbalance between the supply and demand of housing” that will only increase “in the coming months.
– .
