Property prices around the world are rising faster than inflation for the third consecutive quarter according to a new International Housing Observatory report, suggesting pressures are mounting within the global housing market.
Experts say this increasing pressure, along with stagnating affordability, means housing is becoming increasingly out of reach for many households in major economies across the world.
The Netherlands topped the chart with the highest increase in property prices between July - September 2024 with a 3.2% increase in house prices, followed by Spain (1.7%) and the UK (1.3%). Property prices in the United States grew by 0.5% while Canada's housing market bucked the global trend, with property prices decreasing by 2.3%.
And it's not just homeowners that are affected. The latest report reveals the cost of rents also increased across almost all of the countries studied during the same period, with the UK recording the highest rental increase of 1.7% across the quarter.
The latest report, published by the International Housing Observatory at Lancaster University Management School focuses on the latest data available - the third quarter of 2024. First launched in 2019, the International Housing Observatory sees leading economists from Lancaster University Management School, the University of Alicante and the Federal Reserve Bank of Dallas undertake in-depth analysis of data from the Globalization Institute of the Federal Reserve Bank of Dallas in order to provide real-time monitoring of real estate markets and house price forecasts across the world.
Its latest quarterly report is the second the team have produced in a bid to help homeowners, central banks, housing experts and policymakers from across the world gain a better understanding of the overall health of the global and local economies.
Lancaster University's Professor Efthymios Pavlidis, Co-Director of the International Housing Observatory, said: "While rising house prices can indicate a strong economy, sustained or excessive growth can be worrying and have negative consequences for both global and local economies as well as individual households - which is why close monitoring of these markets on a global scale is so important.
"Our latest report shows that house prices have been consistently increasing in some of the countries in our sample. This can put pressure on the economy in several ways. If house prices rise too quickly and become detached from 'fundamentals' such as incomes or rents, it can lead to what we call 'speculative bubbles' - and when these bubbles burst, economic recessions can be triggered, as seen during the 2008 financial crisis.
"If the countries we identify in our latest report continue to see house prices increase at a rapid pace, we could see property prices straying too far away from income levels, increasing the risk of market crashes and economic instability."
The report also highlights how governments around the world are responding to the market pressures. The authors detail the variety of measures enforced by governments to combat rising property prices and improve housing affordability, from a 'whirlwind' of incentives in Australia and China, to the tax reforms in the UK.
"The good news is action is being taken around the world to address the unaffordability we are seeing in the market, though this action looks different in every nation," Professor Pavlidis continues. "The UK housing market, for example, may experience a slowdown post April 2025 due to the higher transaction costs implemented by the increase to stamp duty taxes, potentially leading to a cooling of house price growth.
"However, increased costs for UK landlords could also result in higher rents as they seek to maintain their profits, which could exacerbate affordability issues for tenants. This could see UK households stuck in a vicious cycle - higher rents reduce renters' ability to save for a down payment, delaying or preventing home ownership which in turn widens the gap between renters and property owners, reinforcing long-term economic disparities."
The International Housing Observatory analyses data from China, Australia, Belgium, Canada, Switzerland, Germany, Denmark, Spain, Finland, France, UK, Ireland, Italy, Japan. South Korea, Luxembourg, Netherlands, Norway, New Zealand, Sweden, the United States of America, South Africa, Croatia, Israel, Slovenia, Colombia and Portugal to compile their global report.
The next report will be released in April 2025.
