Global housing cooldown

Around the world, soaring borrowing costs are squeezing homebuyers and property owners alike. From Sydney to Stockholm to Seattle, buyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices downward. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset. The rapid cooldown in real estate—a leading source of household wealth—threatens to worsen a global economic downturn. While the slump so far isn’t near the levels of the 2008 financial crisis, how the decline plays out is a key variable for central bankers who want to tamp down inflation without hurting consumer confidence and triggering a recession. Already, frothy markets such as Australia and Canada are facing double-digit house-price declines, but the full impact of aggressive rate hikes may take time to play out. “We will observe a globally synchronized housing market downturn in 2023 and 2024,” warned Hideaki Hirata, a former Bank of Japan economist. —Natasha Solo-Lyons

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