Expected Global Real Estate Trends in December 2022


Like homebuyers in the U.S., home seekers in other parts of the world are grappling with inflation, high mortgage rates and record-high home prices, making it harder to afford a home, especially for down payment-challenged first-timers.

Explains Realtor.com economist George Ratiu, “A household earning the median annual income of $71,000 and using a 20% down payment could afford a home priced at $448,700 in January 2022 when rates were 3.1%.” But now that mortgage rates are 7% or higher, more than double the rates in 2021, the same household can only buy a $341,700 home.

A twenty-five percent decrease in affordability is quite a haircut, but due to the underpinnings of plentiful jobs and few lay-offs, relatively low housing supplies, and high demand, sellers are still listing their homes for higher prices than ever. But market conditions are beginning to change. Inflation is still rapid, the latest gross domestic product reading is lackluster, and the stock market has battered investors. Consumer sentiment remains high because they believe inflation will be tamed soon.

U.S. economists at Fannie Mae expect 2022 to end with home prices 16% higher than a year ago, and the Mortgage Bankers Association expects a 9.8% increase year-over-year, and a more modest 2.8% increase in 2023.  

Buyer fatigue is beginning to set in. Homebuyers are demanding homes in better condition than sellers have bothered with during the blistering hot seller’s market of the last two years. They’re pulling out of contracts as home inspections reveal future problems, or they’re asking sellers to take less for their homes.  Homes are staying on the market longer, and in San Diego, Portland, Oregon, Phoenix, Indianapolis, Sacramento, Tampa, Tacoma, Salt Lake City, Denver, and Boise, half or more of home sellers are repricing their homes lower to meet this new reality. According to UBS.com, homes in Miami, Los Angeles, San Francisco, Boston, and New York are overpriced and likely face market turndowns.

Many global cities are facing the same problem, despite the shortage of available housing. Urbanization helped fuel the housing boom of the last decade, yet urban residential rents have risen hand in hand with local wages. This suggests that record home price increases have another cause – the low interest rates provided by central banks. But that’s rapidly changing. To combat inflation, interest rates have almost doubled across the world, making urban home ownership far less affordable. Blaming higher interest rates, inflation, turmoil in the financial markets, and deteriorating economic conditions, cities with high home valuations are already starting to see price corrections.

GoldmanSachs.com research for its G-10 home price model suggests home prices will decline by around 5% to 10% from the peak in the U.S., 15% in Canada and a little less than 5% in the U.K., and the drop is expected to be even larger in inflation-adjusted terms. Researchers suggest that while home price declines may seem large, they’ll only partly offset the record jump in housing prices after February 2020. While the drop in home prices may seem large, those declines are expected to only partly offset the jump in housing prices that happened after February 2020 when U.S. home prices soared 42% and Canada’s rose 52%, without inflation adjustment.  The housing market has already fallen 7% in Canada and Sweden over the last six months, and by 11% in New Zealand over the last eight months.

The UBS Global Real Estate Bubble Index finds that imbalances between home prices and rising interest rates are signaling bubbles ready to pop in Zurich, Munich, Hong Kong, Vancouver, and Amsterdam. Tel Aviv, Tokyo, Geneva, London, Madrid and Singapore are also overvalued. Fair-valued cities include Sao Paulo, Milan, Warsaw, and Dubai. Out of 25 cities making up the index, only Paris, Hong Kong, and Stockholm did not see prices climb.

What put today’s housing into bubbles zones, says UBS, is housing prices going much higher than incomes and rents. Out of the 25 indexed cities named in the bubble zone, home prices climbed by an average of 60% in inflation-adjusted terms while real incomes and rents increased by only about 12%.

With the lending boom strongest in the Middle East, U.S., Canada and Australia, there is a corresponding increase in aggregate household debt relative to economic output. Household debt has grown far faster recently than the long-term average, and will be further aggravated as interest rates rise.  Skilled service workers, hampered by mortgage rates that have doubled since mid-2021 can now afford one-third less living space, about 50 square meters, than at the beginning of the pandemic.

Exacerbating household purchasing challenges, along with rising inflation, is the punishing stock market, logging the worst performance in years. Although gains and losses are somewhat phantom, declining investments make households less wealthy and more vulnerable.


Home prices reached record highs amid economic turmoil, partially caused by the September mini-budget that proposed unfunded tax cuts, huge government borrowing and exempted energy companies from a windfall tax, crashing the pound’s value against the U.S. dollar and roiling financial markets. Property website Rightmove reported that the average price coming to market in October was up 0.9% to a record £371,158, a smaller increase than the rest of the year. However, sold prices were down slightly, with 23% of home owners discounting their homes versus 21% the previous month. The sudden increase in mortgage interest rates caused lenders to scrap over 1000 mortgage deals, and caused buyers to back out of contracts they could no longer afford as interest locks expired only to be replaced by much more expensive offers from lenders. The result has been a sudden boom in rentals.

Frankfurt and Munich

USB details that double-digit price gains have stopped in Frankfurt’s and Munich’s housing market, where nominal property prices rose by 5% between mid-2021 and mid-2022. That’s half its average growth rate of the past five years as well as the national average. But Frankfurt’s nominal housing prices are currently still more than 60% above five-years-ago, largely driven by investors, while Munich’s housing market is supported by extremely low vacancy rates and a growing workforce. Overall, the German economic outlook is tepid and rising mortgage costs are slowing housing demand. A skilled service worker can finance 40% less living space than before the pandemic.


With the strongest price growth in housing among Eurozone cities at 17% between mid-2021 and mid-2022, Amsterdam’s mortgage rates rose half as much as other Eurozone areas. Nominal rents and incomes have also risen, but more slowly than property prices.


Residential house prices in Singapore increased by almost 11% in nominal terms between mid-2021 and mid-2022, while rental prices soared 16%. Known as a strong business hub and safe haven for wealthy investors, and with strong demand from expats, Singapore is taking measures to keep its market from overheating, including higher stamp duties on residential and secondary properties, tighter mortgage standards, and increasing housing construction with three times the number of units to be completed in 2022 and 2023 than during the pandemic.


Oil prices have helped Dubai’s housing market rebound after seven years of falling prices with a nominal price growth of 10% between mid-2021 and mid-2022. The market is still 25% below its 2014 peak. With more disposable income, a new visa program with easier residence requirements for skilled professionals, and new transactional transparency, Dubai is attracting wealthy migrants and skilled workers to own homes while rental housing has grown an astonishing 22% since mid-2021. 

When borrowing costs outpace yields on buy-to-rent investments, housing is less attractive to investors. As prices grow more distant from wages and rents, the higher the likelihood of a larger market correction. 

Previous PostNext Post