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Spain’s Supply of Rental Homes Jumped 52% in One Year

Source: Brookings Institution

Spain now has one of the lowest rentership rates compared to European countries, with 23% of households renting their homes. Around 70 years ago, renters made up half of the housing market, according to Brookings Institution. Now, of the 18.6 million households in Spain, fewer than one in four contain renters.

Over the last 20 years, the number of renters in Spain had actually been gradually increasing due to job insecurity and caution around banks granting mortgages. But the COVID-19 pandemic caused rental prices to drop significantly — marking the first drop since the 2009 financial crisis. Brookings states that “the supply of rental homes in Spain increased 52% ​​between September 2019 and September 2020.” 

Similar to other countries, Spain saw a loss of interest in renting during the pandemic — reflecting a decline in tourism and people’s growing desire to relocate to cheaper areas and have more space. The Spanish government responded with policies for “mortgage payment moratoriums, rental assistance and the suspension of evictions for vulnerable families,” notes Brookings.

U.S. Housing Sales Plummet to Two-Year Low

Housing sales in the U.S. have sunk to their lowest point since May 2020, declining by 5.9% in July. This is the sixth consecutive month that sales have declined, reflecting the impact of rising mortgage and interest rates. This is the first U.S. housing downturn since the Great Financial Crisis in 2007-2008.

Some experts project that housing sales may soon stabilize, as the mortgage rate falls from 6% in June to 5%. “Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers,” said National Association of Realtors Chief Economist Lawrence Yun in Trading Economics.

But researchers at Goldman Sachs project that the housing market downturn will continue into 2023. They predict that this year, new home sales will drop by 22%, existing home sales by 17%, and housing GDP by 8.9%. Despite the downturn, housing prices are expected to remain high due to inflation and a limited inventory of homes.

UK Prime Minister Caps Energy Bills As Costs Skyrocket

Source: The Economist

The United Kingdom’s new prime minister Liz Truss is under pressure to help Britons with energy costs, as natural gas prices skyrocket and winter approaches, reports The Economist

On August 26, energy regulator Ofgem reset its energy price cap, raising the average household’s monthly energy bills from 164 pounds ($194) to 296 pounds ($340), starting in October. Forecasts from Cornwall Insight consultancy group predict that without government intervention, energy bills will rise to 449 pounds ($516) in January and 551 pounds ($633) in April. Without government support, experts estimate that energy bills will make up 14% of the poorest fifth of households’ spending — double the amount before the pandemic. Middle-income households will also face steep prices, with 9-10% of their spending consumed by energy costs.

In response, Prime Minister Truss announced that energy bills will be capped for all households at 2,500 pounds ($2,874) a year — about $240 a month — until 2024. Businesses will also benefit from the price cap, though for a shorter period of six months.

Climate Change Causes Deadly Flooding in Pakistan

Source: The Economist

A deadly monsoon season in Pakistan has led to the country’s worst flooding in a decade, as climate change causes increasingly extreme weather around the world. 

By the end of August, Pakistan had received three times its annual average rainfall. Summer monsoon rains caused the worst flooding in areas around the Indus River, with some provinces receiving up to five or six times their 30-year average rainfall. More than 33 million people have been impacted by the flooding, and at least 1,100 people have died. 

Pakistan is responsible for less than 1% of the world’s greenhouse gas emissions, but it is the eighth-most vulnerable country to climate change. Some officials estimate that the recovery will cost $10 billion. The costs of flooding also affect the rest of the world: Flooding in 2021 destroyed more than 12 million acres of crops, contributing to the global surge in food prices. Worldwide, flooding has caused over 250,000 deaths and led to economic damage exceeding $1 trillion since 1980.

Risk of Stagflation Rises Around the World

 

The risk of stagflation is rising around the world as inflation rates hit record highs and economic growth slows, reports the World Bank. Stagflation, a period of high inflation, low economic growth, and high unemployment, is a rare occurrence, last seen during the 1970s OPEC oil embargoes. But the combination of the Ukraine crisis and the pandemic has pushed prices high, while hampering growth and limiting consumer spending.This is the “largest commodity shock we’ve experienced since the 1970s,” said Indermit Gill, the World Bank’s vice president for equitable growth, finance and institutions, in an interview with the Financial Times.

The forecast for global economic growth is down to 3.3%, while inflation is up to 6.2%. Asian forecasts have been revised down due to supply chain disruptions, China’s zero-COVID policy, and Russia’s invasion of Ukraine. 

Latin American forecasts have similarly been revised, due to surging inflation. Europe and the U.K.’s energy prices and sanctions on Russian energy imports may trigger an economic crisis. High energy and food prices are also impacting Africa and the Middle East.

But the U.S. faces the highest risk of inflation, according to some experts, as the economy contracts and inflation and interest rates rise.

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