The worst may be over, but the recovery in many rich-country housing markets will be tepid and uneven. After a 4% drop in 2010, house prices in America will slip by a further 2% in 2011, according to the Mortgage Bankers Association. The Bank of Spain expects Spanish homes to lose 5% of their value. House prices in Britain will rise by 3% but remain below their 2007 peak value until 2013, says the Centre for Economics and Business Research.
Things to look out for that may disrupt or slow the cycle of growth are countercyclical property taxes. Financial authorities all over the world are introducing stricter capital requirements for banks to prevent another financial bubble forming. Similar restrictions, such as higher downpayments and stricter creditworthiness standards, will be aimed at borrowers. If these don’t work well, policymakers may consider a tax on borrowing that varies with asset prices and other cyclical indicators.
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