Housing stabilisation likely to be short-lived

Recent months have seen tentative signs of a stabilisation in global house prices: After eight months of declines, our index posted small gains in February-April. This has raised hopes that the housing correction could be ending, but we think such a conclusion is premature and it is more likely that prices will resume their decline in the months ahead.

What you will learn:

• Housing transactions picked up in several major economies lately thanks to lower mortgage rates, an easing in the pace of bank credit restrictions, and a reduced squeeze on real incomes. But mortgage rates are rising again and credit standards tightening further.
• A number of other fundamental house price drivers also point to the likelihood of further price declines in the months ahead.
• A further risk factor is that the full impact of rising short-term rates has yet to feed through to mortgage borrowers in most major economies.
• A positive factor is that the tightening of mortgage credit standards by banks has been much less decisive than it was in the global financial crisis.