From Bloomie comes analysis on how a synchronised housing bust is developing across global cities once considered ‘safe havens’:
In Manhattan, the median condo price dipped below $1 million for the first time in three years. Hong Kong home values endured their longest losing streak since 2008, while prices in outer London neighborhoods fell for the first time since 2011. Sydney home owners are grappling with the worst real estate slump since the 1980s.
Luxury residential prices are growing at the slowest rate since 2012, according to a Knight Frank index of prime properties in 43 cities…
Governments became concerned the gains were unsustainable, and reacted with measures aimed at curbing the flows of international money…
Similar dynamics are playing out around the world. The number of home sales in Vancouver dropped 32 percent in 2018 from the previous year, following a series of new taxes, stricter mortgage rules and rising interest rates. Median prices in Auckland registered their first annual drop since 2008 after the New Zealand government passed legislation to restrict foreign buying that it said was partly to blame for escalating housing costs. Home prices have dropped 11 percent in Sydney from their 2017 peak after government restrictions on foreign purchases and tighter credit.
Last year, the International Monetary Fund (IMF) released a new report showing that house price growth has become increasingly synchronised at both the city and country level, particularly since the global financial crisis.
In summary, the growing integration of financial markets along with the synchronisation of interest rates and the global flow of institutional investment and wealth has meant that global dwelling value are more likely to move in tandem.
So, in countries that are more open to global capital flows, house prices are behaving more like financial assets, such as stocks and bonds, which are influenced by investors elsewhere in the world.
This is particularly the case in markets like Sydney/Melbourne, Auckland, and Vancouver/Toronto, which were also magnets for Chinese money, resulting in what was explosive growth followed by the current pull-back.