Shaky property markets across much of the world pose another risk to the global economy as higher interest rates erode household finances and threaten to exacerbate falling prices.
Reports last week have shown the U.S. housing slump stretched into a fifth month, China's home sales slide continued and price declines persisted in both Australia and New Zealand. In Britain, prices are now in their worst losing streak since 2008.
Sliding home values threaten to undermine consumer confidence and weigh on household spending, which had been a rare bright spot for the global economy last year. Investment, too, could take a hit as developers scale back projects in response to falling prices, waning demand and higher borrowing costs.
In the past three housing busts, inflation-adjusted house prices have retraced about half of their previous gains, according to Oxford Economics. Prices have risen about 40% around the world since 2012 and the consultancy said in an October report that in a worst-case scenario, housing market weakness could knock global economic growth to around zero this year.
In the U.S., last year's run-up in mortgage rates cast a chill on the housing market, leading to the worst annual drop in sales of previously owned homes in more than a decade. That's pressured prices, particularly in parts of the country such as San Francisco where affordability was already stretched.
That strain is set to continue during the Federal Reserve's campaign to tackle inflation. Policymakers are widely expected to raise rates by a quarter percentage point at the conclusion of a two-day gathering last week, to a range of 4.5% to 4.75%.
In the world's No. 2 economy, China's property slowdown is showing few signs of abating, even as authorities ramp up efforts to revive the industry. New-home sales tumbled 32.5% in January from a year earlier, preliminary data from China Real Estate Information Corp. showed on Tuesday.
Officials have taken steps to ease financing to cash-strapped developers in recent months, unwinding a deleveraging campaign that triggered a wave of defaults and dragged on economic growth in the nation.
Local authorities have also stepped up efforts to stimulate homebuying, including by cutting mortgage rates and easing down-payment requirements. Such steps are unlikely to boost sales until midyear, according to Bloomberg Intelligence analyst Kristy Hung.
The prospect of ongoing weakness in China's property market is a potential head wind to Nomura's otherwise upgraded view of this year's growth prospects, economists let by Ting Lu wrote in a Jan. 31 note. They cited the official narrative that "housing is for living and not for speculating" and declining prices as brakes on speculative demand.
In the U.K., more than a decade of steady growth has given way to the longest house price slump since the global financial crisis in 2008.
Nationwide Building Society said the average home value has fallen for five months in a row. A jump in mortgage rates and the tightest cost-of-living crisis in a generation is squeezing the spending power of home buyers, putting the cost of property out of reach to more people.
"The overall affordability situation looks set to remain challenging in the near term," said Robert Gardner, Nationwide's chief economist.
The average two-year fixed-rate home loan jumped to a 14-year high of 6.65% in October after the mortgage market was rattled by budget plans set out by Liz Truss during her brief spell as prime minister. Mortgage rates have come down from their peak to well below 6%, but home buyers and households renewing their deals are still facing painfully high monthly repayments.
Prices continued to fall in Australia and New Zealand in January, with the slide likely to continue as neither property market has yet felt the full brunt of last year's spike in interest rates.
Many New Zealand households are on fixed-rate mortgages that have yet to roll over to a new, higher rate. As a consequence, economists are predicting house prices will fall further and will be at least 20% below their late-2021 peak by early 2024.
In capital city Wellington, prices have already fallen 18.1% from a year earlier, CoreLogic data show. In the largest city, Auckland, prices are down 8.2%.
It's a similar story in Australia, where a spike in loan repayments for those whose mortgages switch to higher variable rates this year is set to weigh on consumption, according to a report by Bloomberg Intelligence.
Repayments on 15% of home loans could jump by more than 80% when their ultralow fixed rate expires, analysts Mohsen Crofts and Jack Baxter said in the report. They estimate the hit to household income will be the equivalent of 2.2 percentage points of retail sales.
Housing is even cooling in Singapore, which has been more resilient than many other markets. Home prices rose just 0.4% in the fourth quarter of 2022, the slowest pace in more than two years, figures showed last week. Sales in December dropped to an almost 14-year low.
Still, part of the decline has stemmed from a dearth of new property launches, and analysts expect sales to rebound once supply picks up. Wealthy buyers are also buoying the luxury market.
One bright sign is coming from Hong Kong, which is seeing glimpses of a housing recovery as the border with mainland China reopens. New-home sales in the city may surge more than 50% this year, buoyed by pent-up demand from mainland buyers, according to Bloomberg Intelligence.
Information for this article was contributed by Emma Dong, Shawna Kwan and Tom Rees of Bloomberg News.