An aerial view of homes in a housing development on September 08, 2023 in Santa Clarita, California. (PHOTO / AFP)

BENGALURU - Global property prices in most major markets will rise over the next two years, albeit at a slightly slower pace than predicted three months ago as strong demand and tight supply overshadow higher interest rates, a Reuters poll found.

Home prices across the developed world have defied analysts' expectations, as they predicted at the start of the year prices would register double-digit falls from COVID-19-era peaks. In most markets they will end the year on a positive note.

While price rises are expected to continue into next year and 2025, higher mortgage rates and the lack of supply of affordable homes will restrict prices from rising too much

While price rises are expected to continue into next year and 2025, higher mortgage rates and the lack of supply of affordable homes will restrict prices from rising too much.

The latest Reuters polls of over 100 housing market strategists taken between Nov 15 and Dec 4 showed property prices rising in five of the eight major property markets surveyed for next year and in all of them in 2025.

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"Values are underpinned at the moment by the fact there's low stock availability and that is defending prices. The fact prices haven't fallen very much and actually in many markets are beginning to rise again is down to the fact the stock is very low," said Liam Bailey, head of research at Knight Frank.

"Very few vendors are bringing their properties forward into the market at the moment because they're either trying to protect their current debt costs by not moving properties and not porting their mortgages," he said.

Of the major housing markets polled - US, Britain, Canada, Australia, New Zealand, Germany and Dubai - prices were forecast to go up between 1.3 percent to 5 percent in 2025, while estimates for India were set to surpass 7 percent.

That outlook was still good news for property owners who at the beginning of the year were anticipating a significant dip in value of their homes over expectations the global economy will enter a recession this year.

But that would also mean affordability will remain a concern, especially for first-time buyers who for years have been waiting on the sidelines to get on the property ladder.

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Still, a strong 71 percent majority, 65 of 91 housing strategists, who answered an additional question said purchasing affordability for first-time homebuyers will improve over the coming year.

While many analysts, 51 of 84, who answered a separate question said the supply of affordable homes will improve over the coming two to three years, only 10 among them expected it to improve to a point where it can sufficiently address the demand.

Average US home prices were seen rising 2.7 percent this year and 1.8 percent in 2024. That was higher than a September survey where prices were forecast to flat line in both years

"If you look at construction cost plus land costs, it's difficult to deliver affordable housing viably. I think lack of housing is probably likely to be a feature of most developed markets...for the medium-term (5 years)," added Knight Frank's Bailey.

Average US home prices were seen rising 2.7 percent this year and 1.8 percent in 2024. That was higher than a September survey where prices were forecast to flat line in both years.

Australian home prices, which have recovered all of their 2022 losses since finding a floor in January, were expected to rise 8.0 percent this year and another 5.0 percent next year.

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New Zealand property prices were forecast to rise 4.0 percent next year and 5.0 percent in 2025 compared with expected rises of 5.0 percent and 6.0 percent in an August poll.

While home prices in Germany and Britain were predicted to fall 2.8 percent and 2.0 percent respectively next year, in both markets they were forecast to rise around 2-3 percent in 2025.

The once red-hot Canadian housing market, where prices surged about 50 percent during the coronavirus pandemic, is expected to stagnate in 2024 and then rise 3.3 percent in 2025.

Buoyed by demand from high earners, home prices in India will beat consumer inflation to rise 6.8 percent this year and next.