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Thursday, Jun 24, 2021

Housing Market Frenzy - It’s Not Just Britain, You Know…

Housing Market Frenzy - It’s Not Just Britain, You Know…

EAT's Graham Norwood explores house price booms across the world and insists it's not a uniquely British phenomenon.

Right now it seems that another day means another house price record, an all-time high for transactions, and a conveyancing log-jam the like of which we haven’t seen before.

Mayhem, frenzy, boom - we all know the superlatives, and I’ve written many of them.

Yet our housing market’s amazing performance isn’t exceptional and it isn’t something uniquely British; in fact, the same unexpected surge in residential buying and selling has gone on across much of the western world for the duration of the pandemic.

It seems there’s nothing like a virus to spur on a housing market.

Across the 37 countries in the Organisation for Economic Cooperation and Development (OECD) the average national house price rise between late 2019 and late 2020 was 6.7 per cent, the fastest rate for two decades.

A Reuters poll of economists just last month showed significant increases in their forecasts for house prices in 2021 - the US, Canada, Australia and UAE joined the UK at the top of those revised predictions.

According to Knight Frank, which has conducted its own extensive international research, Turkey has seen an eye-watering 32 per cent annual hike in house prices in the year to the end of March. The agency adds that New Zealand is on 22 per cent and the US, which prices are up 13.5 per cent, is witnessing its biggest property inflation rate for 16 years.

And all of these other countries are seeing annual house price inflation at 10 per cent or more: Luxembourg, Slovakia, Sweden, Austria, Netherlands, Russia, Norway, Canada, and Peru.

Indeed, out of 56 countries looked at by Knight Frank, in the year to the end of March 2021 only Malaysia, Morocco, India and - unexpectedly - Spain saw price falls, but in no case was this worse than down 1.8 per cent in 12 months.

The big question is, why is this happening?

Firstly, those all-important injections - I mean fiscal and monetary stimulus injections, not just vaccines - have led many economies to shift the pain until this autumn or beyond.

Recovery looks to be rapid but until artificial safety nets like furlough are removed from the market, we won’t know the damage caused by Coronavirus to national economies. Between now and then unemployment, inflation and other economic evils are suppressed.

Secondly ultra-low interest rates exist almost worldwide - not only is the British base rate a mere 0.1 per cent, but at different times recently Japan, Sweden, Switzerland and the 19 Eurozone countries have taken interest rates into negative territory.

Again, this is unlikely to change in the short-term, as economies brace themselves for possible Coronavirus repercussions in the years ahead. So, borrowing to buy a home remains cheap by historical standards in the UK and much of the west.

Thirdly there’s a vaccine-fuelled feel-good factor. The depression of early 2021, when the vaccine roll-out looked some way off and the virus returned with more viciousness than expected, has now been replaced in many countries by much greater optimism.

Israel and Canada have a higher percentage of single-jabbed population than the UK; the US, parts of the Middle East and Germany, Italy and France are now not far behind this country. So optimism is rife, which typically translates into housing market activity.

In Britain, and in most western countries, there is a fourth factor: a relative shortage of housing compared with demand. This is not a shortage of stock for sale now, but an absolute and ongoing shortage of properties available for the number of households.

How long all this will last is, of course, unknown: 18 months ago there was widespread concern that prices would tumble and demand slump, so it is clear that forecasts are at best difficult and at worst foolhardy.

However, at least we know one thing: even in a pandemic the responses worldwide have been similar, both by governments in the form of economic parachutes, and by individuals in the form of wanting to change lifestyles and seek more space.

Britain isn’t unique - and nor is the behaviour of its current and future home owners.

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