A real estate crisis has occurred in China for months, and a brutal downturn is expected to happen to the housing market.

According to the Financial Times, the global property market is heading for the broadest slowdown since the financial crash, one year after it peaked last year.

At the end of 2021, the market still looked bullish when house prices in the 38 member countries of the Organisation for Economic Co-operation and Development (OECD) grew faster since records began 50 years earlier.

Data from Oxford Economics, a consultancy, shows a similar trend. In 41 countries, from Norway to New Zealand, house prices were rising thanks to record low-interest rates and buyers with savings to spend.

However, the situation changed dramatically less than a year later. The housing markets around the world are entering the most deepening recession since the financial tsunami.

Homeowners everywhere are grappling with increasingly unaffordable mortgage rates, but potential homebuyers also suffer from a problem: Home prices are rising faster than incomes.

The International Monetary Fund (IMF) has warned that the global housing market is at a “tipping point.”

The IMF has recently published its Global Financial Stability Report for October 2022.

In the report, the fund said: “As central banks around the globe aggressively tighten monetary policy to tackle price pressures, soaring borrowing costs and tighter lending standards, coupled with stretched house valuations, could lead to a sharp decline in house prices.”

The IMF predicted that, in the worst-case scenario, real house prices in emerging markets will fall 25% over the next three years and, in advanced economies, drop 10%.

According to Oxford Economics, house prices in almost all countries will experience a slowdown next year, marking the broadest deceleration in house price growth since at least 2000.

In addition, more than half of the countries could suffer an outright price contraction; something is last seen in 2009.

Adam Slater, chief economist at Oxford Economics, said: “This is the most worrying housing market outlook since 2007-2008.”

He predicted that a housing slump could reduce global economic growth by 0.2 percentage points due to reduced spending. In addition, a decline in residential investment could lead to another 0.6 percentage points of decline in global growth.

Now the market downturn has shown visible signs. Housing inflation is already slowing in most markets, including China, Germany, and Australia.

In China, the real estate crisis has intensified in recent months, with home sales plummeting 26% year-on-year in the first nine months of this year.

Because the sale of unfinished housing projects is a major source of funding for Chinese developers, the sharp decrease has created self-reinforcing liquidity pressures and harmed the economy.

According to the Financial Times, the most significant factor in the housing market’s slowdown is mortgage interest rates.

Mortgage rates in the Euro area, Canada, New Zealand, and Australia surged to new multi-year highs.

In the United States, the central bank’s rate hikes pushed the 30-year mortgage rate steady at 7%, the highest since 2008 and more than double last year.

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