The UK’s house price falls to date – down by 4.2% or 3.2% since their peak in August last year, according to the Halifax and Nationwide respectively – look relatively mild in comparison with some of those locations.
So what is behind the global mini crash, and are there lessons we can learn from what is happening in other countries?
At its simplest, it’s about the cost of money. The long era of near-zero interest rates, which made borrowing to buy a home cheaper than at almost any time in history, is over, for now at least.
The Bank of England has raised rates from 0.1% in late 2021 to 4% today – with a corresponding rise in mortgage rates. Meanwhile, US average long-term mortgage rates are now above 6%. A year ago they were below 4%.
In the UK millions of borrowers are on fixed-rate deals that are still protecting them from sharp increases in their monthly mortgage costs. That’s very different to a country such as Sweden, where most households have variable-rate mortgages that go up in line with changes in interest rates.
As many economists point out, the house price falls follow eye-watering rises in some cities and some types of properties, and values are often only coming back to where they were a couple of years ago. Almost no one is predicting a full-scale property crash.
Some of the price falls are the unwinding of the “race for space” that was a global phenomenon during the coronavirus pandemic. Demand for larger individual houses jumped as people worked from home, leaving apartments in the cold. But over the past year the price of houses has generally fallen more than apartments.
However, even during a worldwide slump, there are always places that boom. Prices of luxury properties in Dubai – a refuge for Russian oligarchs barred in the west – soared by an astonishing 89% in 2022