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Conditions in global housing markets are improving as peak interest rates approach.

Global house price growth ticked up to 3% in the year to Q2, up from 2.9% in the previous quarter, according to . About a third of markets saw prices decline during the most recent three months, narrowing from four in ten over the past year.

Strong demographic trends in major markets, limited inventory of houses for sale, and significant delays to new build projects are all providing structural support for pricing 鈥� especially in markets like Australia, the US and Canada 鈥� which have seen price growth of 2.9%, 3.7% and 6.1% over the past quarter.

How far conditions improve will be limited by borrowing costs. Even if central bankers in key markets opt to refrain from raising interest rates further, the effects of past tightening will continue to work its way into the system. We expect pressure on market liquidity and transactional activity to continue well into 2024.

Leaders and laggards

Turkey leads our index for annual growth once again (up 96%), with nominal prices boosted by sharp underlying inflationary pressures. Lithuania follows (15.3%), with the south-eastern corner of Europe dominating the remainder of the top five spots in our ranking 鈥� with Croatia (14.0%), Greece (14.0%), and North Macedonia (12.9) all featuring.

South Korea, Sweden, Finland, New Zealand, and Hong Kong are currently experiencing the largest rates of price falls 鈥� falling between 12.8% and 8.7% over the past 12 months. However, even at this end of our ranking, only Sweden saw prices fall in the most recent quarterly period.

The easing of downward pressure on house prices will be welcomed by many homeowners, but a full recovery is still a long way off. The 3.0% average rate of growth recorded this quarter is still the lowest rate since Q3 2015, when European markets were still recovering from the European Debt Crisis.

One of the consequences of higher interest rates has been a broad-based decline in investment activity across most economies, and housing investment in particular. The impact of this lack of investment in new housing stock is being clearly revealed in rental markets, with global rents rising at three times their pre-pandemic rate according to our latest . Unless there is a significant structural shift in housing delivery, the same pressures will act to push house prices higher again as interest rates fall in 2024 and into 2025.

Mortgage rates

The average five-year fixed rate mortgage has dipped below 6% for the first time since July, according to Moneyfacts.

Barclays, Halifax, HSBC, NatWest and Santander all announced reductions this week. Mortgage rates will plateau over the coming months, Simon Gammon of 博鱼体育集团 Frank Finance tells . He added: 鈥淭he best deals already start with a four, and I expect rates to settle in that range until the Bank of England opts to cut the base rate, which is unlikely before next spring at the very earliest.鈥�

Easing mortgage rates plus busier seasonal effects have underpinned a moderate revival in demand. Viewing enquiries climbed 12% in the most recent four weeks, though the metric remains a third lower than the same period a year earlier, according .

Living sectors

Investment is flowing in the living sectors partly due to their counter-cyclical features, which offer a bright spot for development given the significant imbalances which exist between supply and demand in the student, rental and seniors housing space.

In the absence of sales supports such as Help to Buy, which officially closed to new applications in October, some housebuilders have turned to bulk sales to rental and affordable operators to boost numbers, writes Oliver 博鱼体育集团. This, in turn, has supported an uptick in sales rates from lows at the end of last year (see chart).

A move to diversify revenue streams through bulk deals with institutional investors is also a trend reflected in of SME and volume housebuilders.

In other news...

Claire Williams on the end of ECB tightening, and the implications for European industrial property.

Elsewhere - UK to ease finance sector rules to boost investment post-Brexit (), business confidence slips in September (), German inflation falls to two-year low (), rural land risks being forested over in corporate 鈥榞reenwashing鈥� (), Tory shift to higher taxes 鈥榤ay never be reversed鈥� (), nearly half of Tory voters still favour Net Zero (), and finally, banks are wary of London housebuilding ().

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