The story is the same in many of the world’s most traditionally strong housing markets. In Europe, in North America, and in Australia and New Zealand, house prices and sales are falling. But why? 

Analysts are in agreement that the international housing market is “losing steam”, and the latest Global Property Guide (GPG) places the blame on “falling purchasing power caused by soaring inflation, tighter lending conditions and record-high borrowing costs due to interest rate hikes, as well as heightened global economic uncertainty”. 

“Historically high inflation” 

But it is this first factor, historically high inflation, that has been given the most airtime in the GPG’s Global Residential Real Estate Market Report for Q2 2023.  

According to the International Monetary Fund, global headline inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and further still in 2024, with a more gradual decline predicted for underlying or “core” inflation.

For the time being, however, the current elevated inflation rates in countries across the globe are contributing to a phenomenon, an illusion, that house prices are rising strongly in some cases and suffering only “modest” decline in other, when in fact the contraction is really quite severe.  

In the US, to take one example from the GPG report, “the FHFA index increased modestly while the Case-Shiller index fell slightly”. In Egypt, “nominal house prices rose by a whopping 33.9% year-on-year in Q2 2023 but in real terms, prices have actually dropped 1.33%”, while Karachi in Pakistan has reported prices soaring by 21.19% that, when adjusted for inflation, have actually decreased by 6.35%.  

The European outlook 

More locally in Europe, the “housing market correction continues”, according to the report.  

“Real house prices in key European markets such as Germany, UK, France and Italy are now falling,” says the GPG. “House prices have risen in only nine of the 28 European housing markets for which figures were available in Q2 2023. Also, only nine countries had stronger momentum in Q2 2023 compared to a year earlier. Most European housing markets are now slowing rapidly, amidst falling global demand, the ongoing Ukraine crisis and supply chain disruptions.” 

Turkey, North Macedonia, Greece and Portugal are where the biggest price increases were noted, while Spain, Malta, Switzerland, Montenegro and Lithuania reported more modest rises.  

At the opposite end of the scale, Sweden’s house prices are described as being in “freefall”. 

“The nationwide residential property price index [in Sweden] fell sharply by 20.17% in Q2 2023 from a year ago. It was the fourth consecutive quarter of year-on-year fall and the biggest decline in recent history,” explains the GPG, noting that the volume of sales also fell by more than 21%.  

Germany and the UK also reported “worsening” housing market conditions. 

In Germany, “the average price of apartments fell by a huge 14.48% (inflation-adjusted) during the year to Q2 2023, in stark contrast to the previous year’s 3.06% growth… as higher mortgage interest rates and rising inflationary pressures have compounded affordability constraints”. 

Meanwhile, in the UK, “real house prices fell by a huge 10.04% in Q2 2023 from a year earlier” as demand reduces.  

Monaco’s neighbours of France and Italy recorded modest or “minimal” price contractions of –4.42% and –4.37% respectively. 

The overall picture 

Of all the markets covered in the GPG – North and South America, the Pacific, the Middle East, South Africa, Europe and Asia – only the latter was given a somewhat “healthy” review.

It should be noted, however, that some of its strongest markets reflect the global narrative. Hong Kong’s housing market conditions have “deteriorated amidst a struggling economy” and South Korea is said to be struggling “after a surge in house prices in recent years”. 

“Pacific housing markets, which were previously booming, are now depressed,” explains the GPG. “Australia and New Zealand are now experiencing sharp house price falls, amidst falling property demand.” 

The Middle East is described as “frail”, although Dubai continues to buck all trends with an inflation-adjusted price rise of +14.56% in Q2 2023.  

Latin America is similarly defined as “weak”, while South Africa’s housing market outlook is “still gloomy”.  

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Photo source: Ryan Mak, Unsplash