In Q3 2023, the global real estate market continues to decline, but it seems that the worst is over   

In the third quarter of 2023, globally, residential real estate markets continue to decline: we are in the classic and consolatory “shared misery, half joy.” 

According to the data from the “Global Residential Real Estate” report by the Global Property Guide, in Q3 2023, the global real estate market continues to experience a contraction. It is due to the decrease in purchasing power caused by the surge in inflation, more restrictive lending conditions, and record financing costs due to the ongoing hikes in interest rates, in addition to heightened global economic uncertainty. 

At the same time, even mortgages for home purchases have decreased, highlighting how the increase in interest rates has led people to rely more on their savings compared to financing methods. 

According to the third-quarter data of 2023, globally, only 17 markets have seen an increase in inflation-adjusted residential property prices, while in 46 markets, prices have decreased. However, high inflation in many countries creates the illusion of a continuous rise in home prices, with nominal prices increasing in 38 countries, remaining unchanged in 2 countries, and decreasing only in 23 of the 63 global real estate markets. 

On a global level, the trend is towards a slowdown. 

(Source: Global Property Guide) 

Snapshot Q3 2023 

• The United States, traditionally a key market, after a decade of real estate boom, recorded a modest increase in residential property prices in the third quarter of 2023 compared to the previous year, with weak demand and a negative sentiment among real estate operators. Canada also shows a similar trend. 
• The decline in the European real estate market continues. Due to residential asset prices increasing in only 8 out of the 29 European countries included in the global survey. Real housing prices in key European markets such as Germany, the United Kingdom, France, and Italy continue to decrease. 

• Pacific real estate markets, which were once growing, are now depressed. Australia and New Zealand are experiencing declines in home prices, with a decreasing demand for real estate. 
• Asian real estate markets continue to show weak performance. Real housing prices have increased in only 5 out of the 17 markets included in the survey. 
• The Middle East has shown mixed results, with home prices increasing in only 2 out of the 6 countries included in the report. However, in terms of trends, 4 countries have performed better in the third quarter of 2023 compared to the previous year. 
• Latin American real estate markets are still weak. Argentina remains the weakest real estate market, but Mexico is improving significantly. 

The largest annual increases in house prices were recorded in the following countries: North Macedonia (+21.63%), Turkey (+17.15%), Montenegro (+15.46%), Dubai-United Arab Emirates (+15.20%), and Georgia (+14.88%), corrected for inflation, while the largest annual decrease in house prices was still recorded in Buenos Aires, Argentina (-60.41%), followed by Sweden (-17.47%), the Slovak Republic (-17.45%), Germany (-12.33%), and Riga, Latvia (-11.40%), all using figures adjusted for inflation. 

The ongoing increase in central bank interest rates to counter runaway inflation, as well as disruptions in supply chains caused by global socio-economic conflicts, continue to weigh on economic activity. Global inflation is expected to decrease from 8.7% in 2022 to 6.9% this year, but it remains high compared to historical standards. 

Market forecasts, however, indicate some optimism due to the likely decrease in interest rates and stable demand. Much will depend on how the sector adapts to new opportunities. In 2025, the effects of the reduction in interest rates, expected not before the second half of 2024, should also be seen, with positive repercussions on the real estate market. 

Performance in the European real estate markets 

Difficulties persist in European real estate markets, with Sweden facing a sharp decline in residential property prices, economic problems, rising interest rates, and high inflation. The Slovak Republic sees worsening market conditions, while in Germany, issues persist due to higher mortgage interest rates and increasing inflationary pressures. In the United Kingdom, the real estate market has declined rapidly, with slowing economic growth. 

Among European real estate markets struggling, Riga, Latvia faced home prices declining by 11.40% year on year in the third quarter of 2023, Jersey (-11.31%), Warsaw, Poland (-10.72%), Vienna, Austria (-10.11%), France (-6.33%), Romania (-5.96%), Norway (-5.53%), and Iceland (-5.29%). All, except Latvia, have recorded weaker performances in the third quarter of 2023 compared to the previous year. All these countries, except Poland, Romania, and Jersey, have seen quarterly price declines in the third quarter of 2023. 

Moderate declines in home prices have been recorded in Finland (-4.98%), Ireland (-4.17%), Russia (-4.00%), the Netherlands (-3.72%), and Italy (-3.47%). Although Finland, the Netherlands, and Italy have indeed shown a deceleration in home price declines year on year in the third quarter of 2023. 

Greece, on the other hand, is strengthening, while Portugal has proven to be resilient. 

But there are also European countries that, albeit to a modest extent, are growing: namely Spain (3.85%), Malta (1.79%), and Switzerland (0.81%).