AUSTRALIA (Commonwealth Union)_Australian home prices are falling, but in the social media age of obsessing over what everyone else is doing, it’s worth questioning how we compare to the rest of the globe.
The International Monetary Fund, the so-called international bank, has offered mixed news for Australia, predicting that the country will avoid a recession but that housing prices will fall another 10%, on top of the roughly 5% drop already recorded by most state capitals. The IMF has some bad news for borrowers, saying that the Reserve Bank of Australia must maintain raising interest rates in order to rebalance domestic demand and keep inflation under control.
Given falling house prices and Australia’s inflation rate of 7.3%, which is somewhat lower than global inflation of 7.4%, the World Bank stated monetary and fiscal policy tightening was required. As Australian homeowners deal with rising interest rates and falling house and apartment prices, they may find solace in the fact that they are in good company globally.
Only a year ago, Australia and the rest of the OECD’s advanced nations were seeing the strongest rate of house price growth in OECD history. House prices were rising in 41 countries, from the Netherlands to New Zealand, boosted by record low borrowing costs and purchasers with cash to spend.
However, the economic shockwaves created by Russia’s invasion of Ukraine have flipped the global economy upside down, and people have been crushed by quickly rising interest rates, stagnant wages, and high inflation from Japan to the United Kingdom. Australians might take heart from the IMF’s very bleak property outlook, which reflects global home markets reaching a “tipping point”. “As central banks throughout the world aggressively tighten monetary policy to combat price pressures,” its global financial stability report stated, “soaring borrowing rates and tighter lending requirements, combined with stretched property valuations, might lead to a dramatic decrease in house prices.”
Australia’s property market is presently defined by a lack of supply, rising rents, falling property prices, and greater inflation, which is pushing interest rates to climb. While few of us had the insight to buy property in Turkey a few years ago – home prices having climbed 160 percent year on year – we can be equally relieved if we avoided buying property in Colombo, Sri Lanka, where prices have decreased more than 35 percent year on year.
