Surge in house prices worldwide stoking concerns
- 3 years ago
전 세계 부동산 가격 상승, 그 원인과 앞으로의 전망
Our next story is the surge in house prices not just here in South Korea, by worldwide.
Joining us by phone is Lee Kyung-min of The Korea Times.
Kyungmin, what do you have for us.
House prices tend to fall as a wider economic downturn looms.
But this year, property valuations have kept on rising in many countries despite the deep global recession caused by the coronavirus pandemic.
House price growth has accelerated to an annual pace of almost 4 percent among the OECD club of rich countries this year, with even faster rises in Europe and the U.S.
In the U.S., falling mortgage rates and higher state benefits shielded the housing market from the pandemic, as prices rose by an annual rate of almost 5 percent in the second quarter.
There were even sharper price rises in much of Europe, notably Germany, the Netherlands, Portugal, and Poland.
What is the driving force behind the price surge?
The surge in price is fueled by the vast stimulus packages from governments and central banks put in place to support struggling companies.
The measures largely allowed many workers to keep earning and kept borrowing costs near record lows.
For example, in Germany's case, some banks are offering to lend 100 percent of the purchase price.
This, together with 10-year mortgages at rates as low as 0.6 percent, is fueling the property market.
Regarding this, Germany's central bank has expressed concerns, saying in a recent report that apartments in the country's biggest cities were 30 percent overvalued compared with the long-term ratio of prices to rents. However, it added that this reflected rising land prices rather than any "destabilizing, speculative demand motives."
The warning came as the volume of land sold each year in larger cities there has fallen by a third since 2012, whereas prices have more than doubled.
This could be highly worrisome. What do the experts say?
They mostly agree that there are risks ahead.
But they also say the influx of capital is attributable to investment funds being reallocated from financial markets to the housing market.
Of note is that banks are starting to rein in their mortgage lending, an indication that they are increasingly becoming fretful about risk perceptions related to the general economic outlook.
They mean that a lack of appetite for lending or tighter credit standards due to worries about borrowers' creditworthiness may challenge the degree to which the monetary easing affects the real economy.
Indeed, concerns are that the pandemic could leave eurozone lenders with an extra €1.4tn of bad loans, well above the levels of the region's 2012 debt crisis.
If that worst-case scenario happens, analysts predict that house prices could plunge, triggered by a sudden tightening of the ultra-loose mortgage market.
Thank you for your reporting Kyung-min.
Our next story is the surge in house prices not just here in South Korea, by worldwide.
Joining us by phone is Lee Kyung-min of The Korea Times.
Kyungmin, what do you have for us.
House prices tend to fall as a wider economic downturn looms.
But this year, property valuations have kept on rising in many countries despite the deep global recession caused by the coronavirus pandemic.
House price growth has accelerated to an annual pace of almost 4 percent among the OECD club of rich countries this year, with even faster rises in Europe and the U.S.
In the U.S., falling mortgage rates and higher state benefits shielded the housing market from the pandemic, as prices rose by an annual rate of almost 5 percent in the second quarter.
There were even sharper price rises in much of Europe, notably Germany, the Netherlands, Portugal, and Poland.
What is the driving force behind the price surge?
The surge in price is fueled by the vast stimulus packages from governments and central banks put in place to support struggling companies.
The measures largely allowed many workers to keep earning and kept borrowing costs near record lows.
For example, in Germany's case, some banks are offering to lend 100 percent of the purchase price.
This, together with 10-year mortgages at rates as low as 0.6 percent, is fueling the property market.
Regarding this, Germany's central bank has expressed concerns, saying in a recent report that apartments in the country's biggest cities were 30 percent overvalued compared with the long-term ratio of prices to rents. However, it added that this reflected rising land prices rather than any "destabilizing, speculative demand motives."
The warning came as the volume of land sold each year in larger cities there has fallen by a third since 2012, whereas prices have more than doubled.
This could be highly worrisome. What do the experts say?
They mostly agree that there are risks ahead.
But they also say the influx of capital is attributable to investment funds being reallocated from financial markets to the housing market.
Of note is that banks are starting to rein in their mortgage lending, an indication that they are increasingly becoming fretful about risk perceptions related to the general economic outlook.
They mean that a lack of appetite for lending or tighter credit standards due to worries about borrowers' creditworthiness may challenge the degree to which the monetary easing affects the real economy.
Indeed, concerns are that the pandemic could leave eurozone lenders with an extra €1.4tn of bad loans, well above the levels of the region's 2012 debt crisis.
If that worst-case scenario happens, analysts predict that house prices could plunge, triggered by a sudden tightening of the ultra-loose mortgage market.
Thank you for your reporting Kyung-min.