The shock of central banks raising interest rates rapidly last year, which shook the global housing market, has been replaced by a new cold reality: the real estate boom that fueled wealth for millions is over.

The world’s markets are caught in a vicious cycle of rising borrowing costs and an acute shortage of housing that keeps prices high. Housing in many places has become even more unaffordable, and property owners who have resetting mortgages are facing increasing financial pressure.

The US mortgage market is frozen, as low-rate homeowners are reluctant to move and buyers are squeezed.

The value of houses in the boom areas, such as New Zealand and Canada have not declined significantly for home buyers. People who bought at peak prices now struggle with increased loan payments.

Landlords are in distress from the UK to South Korea. In many places, the higher interest rates make it more difficult to build.

Renting or buying a home, the scenarios are different in each country. However, they all contribute to a global economic drag as people spend more money on housing.

The viability of homeownership, a route to middle-class financial security that has been a foundation of personal finance around the globe for generations, is now looking more challenging. Long-term owners who are able to capture equity through rising values or don’t have a mortgage can invest their cash in more lucrative investments.

There is still a lot to be discovered. The ongoing economic problems in China and the deepening conflict in the Middle East could lead to a global recession that would cause housing prices to fall and reduce demand, leading even more financial turmoil. Commercial property is also a concern for the economy.

Even as inflation falls and rate-hiking campaigns in many countries ease, consumers are beginning to accept that borrowing costs will never be as low again as they were 15 years ago.

The situation was different when the rates shot up suddenly and people thought they could make it through or get mortgages in anticipation of refinancing them later. The situation is different when higher costs persist for many years.

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The US has seen the sales of previously-owned homes drop to their lowest level since 2010, due to a combination of low inventories, rising prices, and the highest mortgage interest rates in the last generation.

Data from Intercontinental Exchange shows that the market is the most affordable it has been in 40 years, with a median household income of about 40% required to buy a typical house.

It is possible that the most severe effects are yet to come. Goldman Sachs economists stated in a report released last month that sustained mortgage rate increases will have the greatest impact on 2024. The economists estimated that the number of transactions would fall to its lowest level since early 1990s.

This will have a knock-on effect. The elderly may not be able to move around as much, and may have to live with their families and friends.

The vast majority of homeowners will not be affected by the rate hikes which would otherwise result in forced sales or foreclosures and give buyers an opportunity to enter the housing market.

Hong Kong has also been affected by China’s economic slowdown, population exodus, and increasing rates, which have stopped the once unstoppable rise in prices. The city’s monetary policies are generally in sync with US policy since its currency is tied to the dollar.

Mortgage rates have more than doubled since the start of 2022. The prices of existing homes in this notoriously expensive region have dropped to their lowest level in six years. Builders are now offering steep discounts, and the government has lowered stamp duty for some buyers.

Hong Kong’s housing market will continue its decline unless interest rates begin to fall. The city’s housing market has been booming for the last decade, but many still cannot afford to buy a home.