When the COVID19 pandemic struck, real estate companies across the world projected that the housing market would slump or stagnate. But the opposite happened. Since the summer of 2020, housing markets across the world have boomed. The unexpected increase in homebuyer demand saw housing inventory dry up pretty quickly.
By the spring of 2021, buyers had seriously outnumbered the homes for sale. As a result, housing prices soared, and bidding wars kicked off between several real estate companies across the world. In 2021, home prices in the US increased by a whopping 18.8%. Now, the real question is – will the global housing market still be hot in 2022? Let’s explore.
The State of House Prices Across the Globe in 2022
The volatility caused by the COVID19 pandemic was the driving force behind the growth of the residential real estate sector. 2022 is widely expected to be a more stable year for this sector. However, it’s impossible to accurately assess the global housing market in 2022 without understanding the events of the previous year.
The Knight Frank’s Prime International Residential Index (PIRI) tracks the value of the 100 most expensive houses in the world. According to this index, these houses increased in value by 8.4% in 2021. That’s the highest yearly increase since 2008 when the index was launched.
Here are some key trends that this report suggests will impact housing prices in 2022 and beyond –
- 35% of all luxury residential markets in the world increased in value by 10% or more in 2021. This increase was triggered by the rise in demand for “second homes.” Currently, there are 200,000+ such “second homes” across the world.
- Remote working policies have ushered the rise of “digital nomads.” These professionals are not bound by locational restrictions. They choose their work locations. During the pandemic, many such professionals bought homes across the world, increasing prices along the way.
According to PIRI, here are the best-performing residential real estate markets of 2021 –
- Dubai, UAE: Residential real estate prices in Dubai shot up by 44.4% in 2021 – more than any city in the world. New visa initiatives, economic reforms, and the country’s strong handling of the pandemic have driven severe increases in demand. People are willing to pay 10-20% premiums on residential properties that are ready for use.
- Moscow, Russia: In 2021, long before the Ukrainian invasion, housing prices in Moscow increased by 42.4%. The city is home to many billionaires and millionaires. They were buying up houses with extra space when the pandemic was gripping the country. The lack of housing stock in the city also caused prices to increase rapidly.
- San Diego, the USA: San Diego is just one of the locations in the USA that experienced housing prices increase dramatically in 2021. The country’s soaring wealth combined with the decreasing housing stock is still causing housing prices to soar in 2021. In San Diego, prime real estate prices increased by 28.3%. Miami’s real estate market also increased by 28% in 2021.
2022 – The Year of Stability?
As cities reopen across the world, investor sentiment in the housing market is simple – high-quality residential properties are scarce assets. Instead of waiting for mortgage rates to increase, it’s better to buy them now. That’s why housing prices in most markets will remain consistent in 2022.
Don’t expect prices to increase as drastically as they did in 2021. But don’t expect housing prices to come crashing either. In the long run, inflation and rising mortgage rates will eventually slow down the global housing market. But, in the short term, homebuyers will keep plunging into the housing market and keep prices consistent.