Why are property prices falling in major cities around the world?

Property prices have increased by leaps and bounds in the decade following the Great Recession. Due to loose monetary policy, property prices have risen by ten times in many countries worldwide. Many investors have bought apartments and houses, assuming there will be no change in the market.

Surprisingly, the tide is already turning. According to data released early in 2019, 2018 was a bad global real estate year. In the last year, real estate prices have declined in every major city, financial center, or trade center. There are both global and regional factors that have contributed to the decline. We will examine some of these factors in this article.

London¬†The price decline has been pronounced in London. Savills reported that the prices of real estate in London have dropped by almost 19% since their 2014 peak. London’s property market has suffered from massive changes in the political and regulatory environment. First, Brexit will change the buyers’ nature in the London property market. There need to be more buyers for the properties in this region, so many European companies and international funds are trying to sell their assets. The British government also knows money laundering from Russia and China has made its way to the London property market. The crackdown against money laundering is hurting the London real estate market. The property tax in London has also been raised, making it even more unaffordable.

Sydney: Sydney property prices have fallen by more than 12 percent since 2014. Prices are likely to drop by another 8% this year. Sydney has never experienced a decline in property prices over the last four decades. Sydney’s property market remained stable even when the world suffered from the Great Recession of 2008. The Central Bank of Australia introduced several measures that have caused the price decline. First, interest-only loan products popular among speculators are no longer available. Australia also increased its sales tax on home sales. The aim was to stop the unrelenting flipping of property, which led to an unsustainable increase in price.

New York¬†According to an established brokerage in New York, the median price of apartments has fallen below $1 million for the first since 2015. New York’s market saw a 22% drop in transactions compared to last year, while the number of houses for sale increased by 15%. The market’s price has fallen by 6%. Two main reasons are responsible for the price decline. First, the Fed hinted at a more aggressive approach for the first decade. In the last year, interest rates were raised four times. This has made mortgages more expensive and priced people out of this market. Second, New York has become one of the most taxed states in the nation. Many businesses leave New York to move to neighbouring neighboring states. The number of people leaving the state is increasing, with more sellers than buyers. This hurts prices.

Hong Kong: Even the most expensive real estate in the world, the Hong Kong market, is not immune from the current slowdown. Hong Kong property prices are down at least 10%, according to experts! JLL, a principal broker, warned that prices could drop by as much as 25 percent if the trade conflict between China and the United States intensifies. Hong Kong has the same monetary policies as the United States. Hong Kong increased its borrowing costs when US borrowing rates rose. Hong Kong has also been working to lower property prices. The Hong Kong government has implemented a tax to discourage builders from hoarding property in anticipation of future value increases.

According to JLL, the prices in Mumbai have been down for two years and are close to 15% lower than their peak in 2014. Several regulatory measures, such as RERA or demonetization, have hit the real estate market hard. The government has also capped the tax benefits available to second homeowners. Investors and speculators have been driven out of the market. End users are still waiting and watching, hoping that prices will fall.

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