Figure 1

Extract A

Metropolitan housing markets face prolonged downturn

Recent monetary policy actions have prompted analysts to forecast that metropolitan residential property prices could experience a prolonged downturn, with some regions expecting peak-to-trough falls of up to 25%. In response to persistently high inflation, the central bank has raised the benchmark interest rate from historic lows of 1.0% to over 5.75%. For the average household with a variable-rate mortgage, this has resulted in debt-servicing costs escalating by more than £4,800 annually.

While some housing advocates argue that a structural shortage of residential units will prevent a major collapse, commercial lenders expect that diminished borrowing capacity will weigh heavily on demand. "The era of ultra-cheap mortgage credit is over, and we are now firmly in a buyer's market," noted one housing economist. The downturn is projected to be most acute in high-cost metro areas, where household debt-to-income ratios are at record highs.

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