Falling demand, heightened stress tests, and government interventions have led to a slump in home prices in Metro Vancouver in recent quarters, and as it turns out similar conditions are also being experienced in a number of major cities around the world.
In a report earlier this month, The Economist analyzed the trajectories that home prices have taken in eight of the “world’s most desirable cities” since 2009, namely Vancouver, Hong Kong, San Francisco, Auckland, London, Sydney, Berlin, and New York City’s Manhattan.
Steep price drops have been experienced in these cities recently. For instance, prime area prices fell by 9% in Hong Kong since August 2018, and a drop of 4.3% was recorded in Manhattan last year, with 60% of homes over $1 million or more failing to sell.
Prices have seen a 16% decrease in Sydney since 2017 and a 20% decrease in London since 2014.
Vancouver was extensively highlighted as an example, with prices falling by 12% in the past year. The report also noted Michael Buble recently sold his West Vancouver home for 28% less than the assessed value.
A number of factors are in play, including new recent monetary and corruption controls in China that make it far more difficult to send money out of the country, which “has affected residential markets far and wide.” Over time, this can be an indicator of a coming global recession.
“Indeed, the IMF observes that house-price movements have become increasingly correlated across the world, and that the link is greater between big cities than between countries,” wrote The Economist.
“That is because housing is becoming a more global asset class rather than a purely local one. The prevailing winds of the international marketplace affect prime residential property much as they do shares and bonds. The IMF notes that international correlation increases at the time of severe recessions and can help predict the risk of a downturn.”
New taxes on the transaction of property purchases by foreigners have also cooled markets in not only Vancouver but also in Britain. In New Zealand, interventions have gone even further with a blanket ban on foreign buying.
“Politicians have played their part, too. Egged on by disgruntled citizens who have found themselves priced out of urban markets, city and national governments have sought to cool market excesses,” added the report.