The end of the global housing boom

After a years-long surge in global capitals, property prices are starting to head lower. From Sydney to Toronto, here’s a look at what’s ahead.

From London to Sydney and Beijing to New York, house prices in some of the world’s most sought-after cities are heading south.

Tax changes to damp demand, values out of kilter with affordability and tougher lending standards have combined to undermine the market. That could have wider implications because the world’s wealthy have been buying homes on multiple continents, meaning a downturn in one country could now pose more of a threat to markets elsewhere, according to the International Monetary Fund.

Prices in the U.K. capital are starting to fall as fears about the impact of Brexit, a slowing economy and high prices damp demand. Sales volumes are down and more properties are being offered for sale as sentiment turns. Properties in central London’s best districts have fallen almost 18 percent since their peak in 2014, with some homes losing as much as a third of their value, according to research by Savills Plc. At the same time developers began work on a record number of pricey apartments, creating a glut of multimillion-pound penthouses in a city with a chronic shortage of affordable housing.

Home prices in Australia’s biggest city are slumping due to a combination of credit curbs, stretched affordability and the end of the “fear of missing out.” Alarmed that lending standards were eroding in the rush for market share, regulators have progressively clamped down on riskier lending— such as interest-only mortgages—and made the banks toughen-up previously lax expense and income verification. That’s made credit harder to come by, particularly for investors who had been driving the market. With prices already the second-most expensive in the world compared to incomes, according to Demographia, affordability constraints are also biting.

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