Inflation expectations drive global housing rush
“In the first quarter of this year, housing prices in almost all parts of the United States are rising rapidly, and there is little sign that housing prices will fall soon.” The Wall Street Journal reported on the 11th that the National Association of Realtors said that in its follow-up Among the 183 metropolitan areas, the median sales price of single-family existing homes in 182 of them achieved a year-on-year increase in the first quarter, of which 89% increased by more than 10% year-on-year. In many countries in Europe and the United States, ultra-loose monetary policies and multiple rounds of stimulus plans to save the economy under the impact of the new crown epidemic are pushing asset prices to historical highs, and the high risk of financial markets makes real estate the ultimate choice of many investors. .
Americans buy homes to fight inflation
The Wall Street Journal quoted Lawrence Yun, chief economist of the National Association of Realtors, as saying: “Almost all markets, large and small, have seen record high housing prices, even those that have been considered out of focus by many home buyers over the years. The same is true in cities.” The National Association of Realtors said that from a national perspective, the median price of existing homes in the first quarter rose 16.2% to $319,200, a record high since 1989. The biggest increase was in Kingston, New York, where median house prices rose 35.5% year-on-year.
According to the Wall Street Journal, as the demand for second homes surged during the epidemic and continued to remain strong, many metropolitan areas with the highest growth rates are holiday destinations. Real estate agents said that in addition to the “rigorous demand” for home purchases caused by remote office and home isolation, low mortgage interest rates have also become an important factor in stimulating purchase demand across the United States, especially high-end real estate. The analysis believes that the Fed’s unlimited quantitative easing policy and extremely low interest rates, multiple rounds of unemployment subsidies, high leverage and high speculation in the capital market, and skyrocketing raw material prices have all contributed to the surge in housing prices in the United States.
The US inflation announced on the evening of May 12 exceeded expectations. In April, the CPI rose 4.2% year-on-year, setting a new high since September 2008. The US “Capitol Hill” website recently reported that people believe that housing is a long-term hedge against inflation. The Fed continues to respond to inflation hints in an “optimistic” way that it will not raise interest rates. High-level officials, including Fed Chairman Powell, have recently repeatedly poured cold water on the possibility of tightening monetary policy to “cool down”, and they all agreed that rising inflation is a temporary phenomenon. However, wealthy investors have begun to “vote with their feet” to diversify their asset allocation by purchasing real estate.
Home-buying craze sweeps across many countries
Recently, news of house price increases in many countries around the world is endless. The latest data from various large-scale real estate service agencies in the UK show that the number of potential buyers and tenants is increasing rapidly. Real estate transaction data in central London has begun to show rapid growth.
The house price index released in April by Halifax, the UK’s largest residential mortgage lending bank, showed that the average house price in the UK was 8.2% higher than last year, the highest annual growth rate in five years. In April, the average housing price in the UK hit a record high again, reaching 258,000 pounds, nearly 20,000 pounds higher than before the epidemic. Between March and April, house prices rose by an average of 1.4% each month. Since March, the growth rate of house prices in the UK has accelerated, with a year-on-year increase of 6.5% in March.
According to data released by the Australian Bureau of Statistics, the average house price in capital cities rose by 3% in the fourth quarter of last year, of which Melbourne house prices rose by 3.4%. The same situation is also happening on the European continent. In the first quarter of this year, housing prices in 14 major cities in Germany have all increased compared with the same period in 2020, and prices in 10 cities have risen by more than 10%. The average house price of Munich, the city with the highest housing prices in Germany, broke the 8,000 euros per square meter mark for the first time, and continues to be the city with the highest housing prices in Germany.
In 2020, overall house prices in Germany will also increase by 8% over the previous year, and house prices in big cities will increase by more than 10% on average.
The central bank faces thorny issues
According to US media analysis, in order to fight the new crown epidemic, many central banks around the world have successively introduced a large number of monetary easing measures to save the economy. At the same time, multiple rounds of fiscal subsidies have also greatly increased the currency circulation in the market, and inflation expectations have been rising. Reuters reported on the 13th that the British Chancellor of the Exchequer Sunak announced in March this year that it would temporarily extend the tax cuts on property purchases, giving new momentum to the housing market. Sunak also announced a new mortgage guarantee program for first-time homebuyers who do not have large deposits. Some analysts also said that due to bank reserves
The return on accumulated interest is almost zero, and financial investment products are riskier, and real estate continues to be considered an attractive investment. The Bank of Australia expressed “unease” about the soaring house prices, but at the same time said it would not intervene for the time being.
German media emphasized that the loose monetary policies of various countries have caused global real estate prices to soar. So far, the world’s real estate market has benefited from micro-interest rates and large amounts of funds from central banks.
“Global housing prices are advancing all the way, and central banks of various countries are facing thorny problems.” Reuters recently reported that soaring housing prices are usually seen as a good thing for the government to create wealth, but history also shows the risk of bubble destabilization, and hundreds of Thousands of people cannot afford the high social costs of housing. “Although the central bank and government-led low interest rates or cheap funds caused by negative interest rates are driving housing prices, they hardly consider housing prices when calculating inflation indicators. This makes some central bank monetary policies inaccurate when determining the degree of inflation. The report emphasized, If housing prices are included in the CPI index, it may lead to a surge in data, which will put pressure on the central bank to tighten policies, even if the economy is still recovering from the severe damage caused by the epidemic.