August 8, 2022

Market and Financial News

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Rising rates raise prospect of property crash

2 min read

Brenda McKinley has been selling homes in Ontario for more than two decades and even for a veteran, the past couple of years have been shocking.

Prices in her patch south of Toronto rose as much as 50 per cent during the pandemic. “Houses were selling almost before we could get the sign on the lawn,” she said. “It was not unusual to have 15 to 30 offers . . . there was a feeding frenzy.”

But in the past six weeks the market has flipped. McKinley estimates homes have shed 10 per cent of their value in the time it might take some buyers to complete their purchase.

The phenomenon is not unique to Ontario nor the residential market. As central banks jack up interest rates to rein in runaway inflation, property investors, homeowners and commercial landlords around the world are all asking the same question: could a crash be coming?

“There is a marked slowdown everywhere,” said Chris Brett, head of capital markets for Europe, the Middle East and Africa at property agency CBRE. “The change in cost of debt is having a big impact on all markets, across everything. I don’t think anything is immune . . . the speed has taken us all by surprise.”

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Listed property stocks, closely monitored by investors looking for clues about what might eventually happen to less liquid real assets, have tanked this year. The Dow Jones US Real Estate Index is down almost 25 per cent in the year to date. UK property stocks are down about 20 per cent over the same period, falling further and faster than their benchmark index.

The number of commercial buyers actively hunting for assets across the US, Asia and Europe has fallen sharply from a pandemic peak of 3,395 in the fourth quarter of last year to just 1,602 in the second quarter of…



2022-06-24 19:01:34

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