Quick Bites | Home prices shifted up across most countries

Housing affordability remains stretched amid the higher interest rate environment  – in Australia and many other countries. Prospective home buyers face high prices and elevated borrowing costs, while homeowners refrain from listing their properties because they do not want to give up fixed mortgages obtained at lower levels.

But the process of re-pricing homes following the pandemic lockdowns is now starting to unwind. As global central banks raised interest rates to tame inflation, home prices have cooled relative to the start of the hiking cycle. However, despite the sensitivity of the residential market to higher policy rates, prices are still above historical averages. Home prices in advanced economies, including most European Union countries, as well as Africa and the Middle East are 10% to 25% higher than pre-pandemic levels.

Rising interest rates have passed swiftly to residential mortgage markets, impeding affordability for current and prospective home buyers. Additionally, scarce home supply is limiting purchases in some regions. In Australia, high immigration and low building approval and construction rates are adding to pricing pressures. In all, housing affordability is more stretched amid still-elevated home prices and higher interest rates.

Source: IMF

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