Signs are pointing to a global property slowdown – why and what does this mean for you?
As we begin 2016, the world’s real estate markets stand at a crossroads. The Economist reported back in October that it had seen house prices rise at an average rate of 4.7% the previous year (in 21 of the 26 economies it tracks). And in December, the Global Property Guide described the boom of recent years as accelerating further, led by Qatar, New Zealand and Hong Kong, all with year-on-year increases of more than 12%.
However, global property company Savills recently put a dampener on these positive trends, predicting a ‘tempering’ of transaction volumes around the world. So why this caution about real estate sales despite such visible growth? And how might it affect you?
Impact of China’s economic slowdown
The Chinese authorities recently brought trading to a halt on the country's stock exchange, as share prices tumbled in reaction to a struggling commodities market. With Chinese wealth creation under threat, luxury property markets in the world’s major cities could suffer. According to CNBC, real estate consultant Knight Frank predicts China’s woes will cut price increases for the world’s most expensive homes from around 3% to 1.7%.
China’s growth slowdown has even impacted commercial rents, particularly in places like Hong Kong, where Chinese tourists are now spending less on luxury goods. Shopping districts such as Russell Street – renowned for the world’s highest commercial rents – are suffering too. It’s been reported that Adidas is now paying about $4.3m HK dollars a month for a store in the city’s Central business district – 20-40% less than what its former occupier, Coach, paid just last year.
How could this affect you?
This property slowdown, coupled with the US Fed’s recent decision to raise interest rates, could mean changing circumstances for mortgage holders all over the world. For example in Sydney, a prime luxury property market, nearly a fifth of all December’s new home loans were fixed-rate. Even though Australia’s Reserve Bank is yet to follow the US Fed, falling global commodity prices and the country’s weakening stock market have prompted Australian borrowers to be wary of future interest rates hikes that could affect their mortgages in 2016.
Elsewhere, governments are taking measures to halt the devaluation of property, such as in Singapore, where the government may be looking at scaling back stamp duty now that house prices are predicted to drop by up to 8% this year.
If you’re a prospective investor looking to save money on buying property overseas, be sure to get advice from The Money Cloud's trusted group of foreign exchange brokers. They will be able to help you make cost-effective international money transfers, particularly for larger and regular payments abroad. You could also look into using future-proofing tools, such as a ‘fixed payment plan’, to set rates for your monthly mortgage payments for up to six months at a time.
For more tips and advice, check our specialist property guides for Spain, Portugal and France, or read more about the latest real estate tech on our blog.