Real estate markets face pressure from rising interest rates

The real estate market is facing significant challenges due to rising interest rates and declining buyer solvency. Higher borrowing costs, driven by post-pandemic inflation and rising bond yields, have reduced the borrowing capacity of households across many developed economies.

In the United States, 30-year mortgage rates have risen above 7%, compared to approximately 6% the previous year. This shift creates a dual obstacle for new buyers: high property prices combined with more expensive financing.

Economically, a tension exists between the desire for affordable housing and the protection of existing property values. While governments face political pressure to make homeownership more accessible, homeowners often resist price corrections that would diminish their accumulated wealth. In some contexts, market activity may be driven by investors seeking to move cash into real estate to avoid potential freezes or losses in other financial products like life insurance.