20 Countries where Housing Prices are Declining or Flat
This article covers 20 Countries where Housing Prices are Declining or Flat, with insights into the current trends in housing prices in different countries across the globe. For a quick overview of the top 5, read our article 5 Countries Where Housing Prices are Declining.
By the end of 2021, the global housing market was thriving. During this period, the real estate markets of 38 countries in the Organization for Economic Cooperation and Development (OECD) showed substantial growth. However, the entire situation changed in 2022 when homeowners across the globe started to experience a crisis. As inflation reared its ugly head in most major countries, central banks responded with raising interest rates. This led to a surge in mortgage payments for new buyers as well as existing borrowers that have variable interest rates. The surge in mortgage payments outpaced income growth and home affordability declined in most countries.
As of 2023, the situation has still not improved despite International Monetary Fund (IMF)'s observations regarding the declining home values in several countries. IMF attributed the declines to the implementation of strict monetary policies and the rise in borrowing costs. The IMF also forecasted that in the next three years, the real prices of houses could go down by 25% in emerging markets. It further predicted that advanced economies could experience a decline in prices of around 10%.
The Bank of Canada believes that a decline in the Canadian housing market could have an adverse impact on the economy as a whole. The bank estimated that economic growth could go down by 0.9% by the end of 2023.
On the other hand, Goldman Sachs (NYSE:GS) believes that the US will not be one of those countries where housing prices are declining or flat by the end of 2023. As per analysts of Goldman Sachs (NYSE:GS), home prices have been forecasted to increase by 1.8% in 2023 and 3.5% in 2024. This indicates that Goldman Sachs (NYSE:GS) believes home prices will stay somewhat unchanged till year-end and start growing in 2024.
The Chinese Housing Market in Disarray
A recent development in the Chinese housing market is one of its biggest groups, Evergrande Group (OTCMKTS:EGRNF), filing for bankruptcy protection in the US. The Evergrande Group (OTCMKTS:EGRNF) has thus become the poster child for many countries with housing crises.
As per Chapter 15 of the US bankruptcy code, the company has sought protection for its assets. It is believed that during this time, Evergrande Group (OTCMKTS:EGRNF) is going to attempt a restructuring deal. The company initially started struggling in 2021, when it reported over $300 billion in liabilities. In addition, two wholly owned subsidiaries of the Evergrande Group (OTCMKTS:EGRNF) have filed for bankruptcy.
To make matters worse, property investment in China has gone down by 7.9% between 2022 and 2023 and is currently standing at $819.8 billion in the first half of 2023.
A Peak into the US Housing Market
As of now, the largest property investor in China, Evergrande Group (OTCMKTS:EGRNF) has filed for bankruptcy in the US, which is indicative of a decline in the housing market. Meanwhile, Goldman Sachs (NYSE:GS) has shown confidence in the US housing market, stating that it already bottomed.
With two conflicting situations at hand, people start to wonder whether they should invest in real estate assets, and which would be the best housing stocks to buy. Consequently, people turn to well-performing stocks to ascertain how well the US housing market is doing. These include Prologis Inc. (NYSE:PLD), Lennar Corp (NYSE:LEN), and American Tower Corporation (NYSE:AMT), among others.
Prologis Inc. (NYSE:PLD), a real estate investment trust, has a market capitalization of around $130 billion and a 10-year average yearly return of 15.6%. By the end of 2022, Prologis Inc. (NYSE:PLD) had property investments or ownership in various development projects, which totaled up to 1.2 billion square feet in 19 countries. The company recorded a share price of $111.12 at the end of 2022, while the price increased by 10% in 2023, currently standing at $122.66 in the second quarter.
Lennar Corp (NYSE:LEN) is another crucial player that is currently performing well in the housing market. It has made headlines, especially after Warren Buffett, the chairman and CEO of Berkshire Hathaway disclosed his investments in the company to the Securities and Exchange Commission (SEC). The stock of Lennar Corp (NYSE:LEN) has gone up by 150% in the last five years, and its share price is readily increasing. The share price of the company was valued at $90.50 in December 2022, but it has since increased to $117 as of August 2023.
The American Tower Corporation (NYSE:AMT), a prominent real estate investment company, is also thriving as indicated by its average annual return of 12.2% over the last 10 years. The stock has an annual dividend yield of 3.4%. With a current market capitalization of $86 billion, American Tower Corporation (NYSE:AMT) was in the portfolios of 60 hedge funds tracked by Insider Monkey.
In 2022, American Tower Corporation (NYSE:AMT) grew its annual revenue to $10.7 billion, an increase of 14.5% compared to the previous year. Nevertheless AMT shares lost close to 20% of their value so far in 2023 as analysts cut price targets of interest rate sensitive stocks like American Tower Corporation. We believe this may be a good time to buy AMT as the stock has rarely been this cheap.
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Methodology
We put together a list of 20 countries where housing prices are declining or flat by evaluating countries with falling house prices. Our ranking included calculations based on two main metrics, namely the housing affordability and the housing price index.
The housing price index was further evaluated based on a 1-year % change and a 3-year % change in the housing prices in each country. The reports used to collect data include Housing Prices data by the OECD and Global Housing Watch data by the IMF.
We first scored selected countries on each index from 1-20 (1 indicating the most declining housing market and 20 the least declining housing market on our list) to generalize the rankings. Then, we assigned weights of 0.45 each to 1-year % change and 3-year % change in the housing price index, as it is the core metric for the basis of our evaluation. Meanwhile, affordability was assigned a weight of 0.1. Consequently, a composite weighted average was calculated to conclude those countries where the housing market is declining or flat.
After the final evaluation of the composite results, countries were ranked in descending order from 20-1. 20 indicated a country where the housing prices are decreasing the least, while 1 signified a country where housing prices have declined the most.
Below is our complete list of 20 countries where housing prices are declining or flat.
20 Countries where Housing Prices are Declining or Flat
20. Luxembourg
1-Year % Change in Real House Prices: 4.01%
3-Year % Change in Real House Prices: 20.20%
Affordability Index: 136.37
Average Score: 12.7
In the first quarter of 2023, house prices in Luxembourg declined by 1.5% compared to the first quarter of 2022. This is the first time since 2009 that the country has recorded a year-on-year decrease in prices.
19. Netherlands
1-Year % Change in Real House Prices: 5.28%
3-Year % Change in Real House Prices: 38.97%
Affordability Index: 136.38
Average Score: 12.3
The Dutch housing market experienced a fall in single-home prices by 8.9% in 2023, standing at $472,000 compared to the recorded peak of $491,000 in the second quarter of 2022. Moreover, apartment prices fell by 9.4%, amounting to $372,000 in 2023.
18. New Zealand
1-Year % Change in Real House Prices: 2.46%
3-Year % Change in Real House Prices: 16.23%
Affordability Index: 126.73
Average Score: 10.85
The overall housing prices in New Zealand have gone down by 18% between November 2021 and May 2023. As of now, the property value in the country stands at $958,000, with a decline rate of 2% as last recorded in April 2023.
17. Canada
1-Year % Change in Real House Prices: -3.71%
3-Year % Change in Real House Prices: 11.75%
Affordability Index: 135.47
Average Score: 9.7
The Bank of Canada raised its interest rate from near zero to 4.5% in 2023. Consequently, mortgage rates went up over 170 basis points. This led to a 15% decrease in average home prices in the country as opposed to their peak in 2022, currently standing at an average of $668,000.
16. Australia
1-Year % Change in Real House Prices: 2.62%
3-Year % Change in Real House Prices: 31.22%
Affordability Index: 120.68
Average Score: 9.45
The housing market in Australia is currently valued at $6.4 trillion. In January 2023, the country experienced a decline of around 9% in house prices compared to its peak in April 2022. The median value of homes in over 200 suburbs has tumbled below $1 million.
15. United Kingdom
1-Year % Change in Real House Prices: -8.88%
3-Year % Change in Real House Prices: 31.78%
Affordability Index: 117.22
Average Score: 9.15
In 2023, the UK experienced the biggest annual fall in house prices since 2009, which is why it is on the list of 20 countries where housing market is declining. Till July 2023, housing prices showed a 3.8% decrease, with the average asking price standing at around $473,000.
14. Ireland
1-Year % Change in Real House Prices: 8.06%
3-Year % Change in Real House Prices: 19.28%
Affordability Index: 115.23
Average Score: 8.4
In the first quarter of 2023, Ireland’s property investment witnessed a year-on-year decline of 18%. A total of $682 million was recorded across 32 transactions, with overall annual capital values experiencing a 9.4% decrease.
13. Norway
1-Year % Change in Real House Prices: -0.89%
3-Year % Change in Real House Prices: 18.80%
Affordability Index: 112.18
Average Score: 7.95
In the first half of 2023, housing prices in Norway experienced a year-on-year decrease of 0.1%. Currently, the average price per square meter of a house in the country stands at around $4,892.
12. Switzerland
1-Year % Change in Real House Prices: -4.32%
3-Year % Change in Real House Prices: 0.73%
Affordability Index: 126.44
Average Score: 7.9
In the first quarter of 2023, Switzerland recorded a decline of 1% in house prices compared to the last quarter of 2022. As of now, the average price per meter square in the country stands at $9,441.
11. South Korea
1 Year % Change in Real House Prices: -5.63%
3 Year % Change in Real House Prices: 12.42%
Affordability Index: 81.92
Average Score: 7.7
In 2023, year-on-year house prices in South Korea declined by 6.9%. Currently, the mean purchase price of dwellings in Seoul amounts to $680,000. Meanwhile, the average price per square footage of homes in other areas stands at $1,072.
10. Belgium
1-Year % Change in Real House Prices: -7.13%
3-Year % Change in Real House Prices: 24.67%
Affordability Index: 103.25
Average Score: 7.65
In the first half of 2023, there was a 4.2% decline in the number of homes sold in Belgium, even though the housing prices in 2023 went down by 0.3% as compared to 2022. Currently, the average price of a typical home in the country is around $349,000.
9. France
1-Year % Change in Real House Prices: -4.69%
3-Year % Change in Real House Prices: 23.8%
Affordability Index: 106.31
Average Score: 7.2
By the end of 2023, sales of housing units in France are expected to fall below 1 million due to rising mortgage rates. There has been a consistent slowdown in the sales of homes in the country since 2021. Between 2021 and 2022, sales displayed a year-on-year decline of 6%.
8. Japan
1 Year % Change in Real House Prices: 1.77%
3 Year % Change in Real House Prices: 11.53%
Affordability Index: 115.14
Average Score: 6.6
In 2023, Japan’s housing market recorded a year-on-year fall of 4.8% as compared to the forecasted decline of 4.6%. Currently, the average price of a standard home in the country lies somewhere between $273,000 and $455,000.
7. Germany
1-Year % Change in Real House Prices: -15.89%
3-Year % Change in Real House Prices: 9.29%
Affordability Index: 120.81
Average Score: 6.45
Germany is one of the countries with the worst housing crisis, given that it is expected to witness a 32% drop in real estate construction between 2023 and 2025. Consequently, housing prices are predicted to go down by 5.5% by the end of 2023.
6. Spain
1-Year % Change in Real House Prices: 0.02%
3-Year % Change in Real House Prices: 33.86%
Affordability Index: 123.09
Average Score: 6.2
It is predicted that the housing prices in Spain will fall by 3% in 2024. However, currently, the prices have increased as compared to the previous year. A house that cost $144,000 in 2022 now costs $153,000 in 2023.
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Disclosure. None. 20 Countries where Housing Prices are Declining or Flat is originally published on Insider Monkey.