Thursday, August 11, 2022

Global house prices become more affordable

Global house prices

While the overall changes are slight, renting has become less attractive and buying property more affordable, according to research by Aetna International

House prices have become more affordable for the average family across the world, including China, Germany, Hong Kong, Singapore and the UK in the last year.

The UK’s rental and housing markets maintained stable rises in the beginning of 2020, but these reversed in mid-2020, bucking predicted gains, when the pandemic’s first wave peaked, according to research by health insurance provider Aetna International.

While the overall changes are slight, renting has become less attractive and buying property more affordable, the report noted.

However, it said it remains to be seen how the government’s stamp duty holiday in mid-2020 will impact the housing market when it ends in March 2021.

In Germany, both the rental and purchase markets are lower than forecast. Price-to-income and mortgage as a percentage of income both dropped 0.7%, while price-to-rent ratios fell inside and outside major cities by 0.9% and 2.9% respectively.

As such buying property is currently more favourable than renting, which the report flagged as a potential issue for expats considering a short-term move.

The nation’s proactive response to the first wave of COVID-19 may well be a reason for the relatively low impact on Germany’s housing markets, which was not impacted as badly as similar countries, such as the UK, it added.

The report reveals that, relatively, house prices in China are dropping. These low prices may explain reports from 2020 that suggest sales are booming in China. This may be due to buyers taking advantage of affordable mortgages.

Meanwhile, Hong Kong has maintained a steady purchase and rental market. However, in 2020, the rate of growth in the rental market declined and both price-to-income ratio and mortgage as a percentage of income bucked predicted trends, with price-to-income ratios falling 11.9% from mid-2019 to mid-2020.

As a result, the affordability of buying a property has increased for families on an average income.

On the contrary, the Philippines saw the biggest increase in price-to-income ratio, from 23.63 to 29.92. This means house prices are nearly 30 times the average family income.

France and Indonesia have also seen housing prices increase relative to average income.

In Indonesia, mortgage as a percentage of income increased 58.9% and price-to-income ratio rose 41.3% since mid-2019, which made housing far less affordable for the average family during the pandemic.

Indonesia experienced a steady growth in COVID-19 infections in 2020. Coupled with an economy in recession, the affordability of housing may continue to feel the impact of these combined circumstances, the report said.

In the US, the price-to-rent ratio (ratio of home prices to annualized rent) in city centre areas has seen a very noticeable increase for mid-2020, rising more than 16% year-on-year. This indicates the market tipping in favour of rental over purchase.

While COVID-19 has clearly had a dramatic impact on the global housing market, it will be difficult to fully assess the resulting change until economies stabilise, noted Caroline Pain, senior vice president, customer proposition, Aetna International.

Expats looking to move abroad should consider the measures put in place to support the housing market by the government in their destination country, Pain said.

She said that above all, expats should prioritise the health and well-being of their family as relocating to a new country is a “big life change even when there isn’t a global pandemic.”


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