What does 2022 look like for global housing market?

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What does 2022 look like for global housing market?

 What does 2022 look like for global housing market?
Image source: © Alexandersikov | Megapixl.com

Highlights

  • Rising inflation, wreaked supply chain, historically low interest rates and labour market shortage have all contributed to rising house prices in 2021.
  • Interest rates have already started to make an uptick after falling to historic lows.
  • Although the trend of rising prices is not expected to be reverse, but higher mortgage rates could slow down the pace.

The housing market witnessed a red hot spell in 2021. The double-digit price rise supported by historically low mortgage rates and inventory shortages in many countries catapulted housing prices way out of the comfort zones of many homebuyers.

It is difficult to predict how the housing market will look like in 2022 as the root cause of the sky-high prices - the COVID-19 pandemic is not over yet. However, the rate at which the prices have shot up in the past might slow down a bit as central banks are prepared to tighten monetary supply to curb running inflation.

Duplex Apartment Housing

Image Source: © Lawcain | Megapixl.com

Interest rates have already started to make an uptick after falling to historic lows to support the battered economy. New Zealand has increased interest rates for the first time in the last seven years, by 0.5% to 0.75%. The UK has recently become a major economy to start increasing interest rates. Although buyers’ demand is expected to remain strong as we have witnessed in 2021, a slight bump in mortgage rates, as a result of increased interest rates could slow down the pace of rising prices.

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The US fed is also expected to hike interest rates a few times this year. The average 30-year mortgage rate is currently at around 3.3%, which is expected to go up to 3.6% by the end of this year. Although, this might not necessarily keep buyers away from the housing market, but it will surely weed out speculative buyers as profit margins would be squeezed after increased mortgages. In other words, a high interest rate environment attracts those who want to live in their new properties and keeps away speculators who are in for a trading purpose.

The supply chain shortages would continue to be there in 2022 which would support the rising price trend. After the pandemic, the labour market has also seen scarcity, which is difficult to predict whether pre-pandemic levels could materialize this year, or we have to wait for some more time for the COVID-19 situation to be suppressed.

What does 2022 look like for the global housing market?

Bottom Line

The rising inflation, wreaked supply chain, historically low interest rates and labour market shortage have all contributed to the rising prices in 2021, owing to the COVID-19 pandemic. As the new Omicron variant has already started to cause havoc around the world with many countries being forced again to go under lockdowns, the housing market does not look set for a downward trajectory.

However, a rising interest rate environment could definitely slow down the pace of skyrocketing prices.

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