Changes in house prices can have positive or adverse effects on a country’s economy. If, for example, house prices are increasing, people are more likely to be confident and we can hence see an increase in consumer confidence. This increase in consumer confidence will mean that people are more likely to spend more money and so we could see economic growth (and we could also potentially see economic development as well). Contrariwise, a decrease in house prices will decrease consumer confidence and could hence have an inhibitory effect on economic growth and development levels within a country. It could, therefore, be argued that a fall in house prices could be a contributing factor to an economic recession (along side many other factors, of course). In certain places around the world there has been a fall in house prices, and this is due to a wide variety of factors. Let us, hence, have a look at some of these factors and see why house prices are declining in certain areas around the world.
According to analysts, house prices in Ukraine have been declining as of late. Statistics show that house prices in Kiev fell by 7.81% year on year during 2018. What is more, house prices in Ukraine have been falling for the last five years (largely due to the influence of the Russian war). This could, potentially, have adverse effects on the Ukrainian economy as a fall in house prices will reduce consumer confidence and, as a direct results, consumer spending. The government can, however, intervene with macroeconomic policies which ought to reduce the lack of confidence.
In addition to Ukraine, there has also been a decline in house prices in certain areas of Trinidad and Tobago. As of 2016, house prices fell sharply due to the effects of the oil price crash. This had large effects on the economy as unemployment numbers rose and led to the shutting down of small-scale businesses. This was all problematic for the economy and meant that the standard of living fell, and so economic development did not take place.
In conclusion, these are just two places in which house prices have declined. I hope to have briefly outlined the effects of a fall in house prices and how bad these effects can be. Always try to keep an eye out for fluctuations on house prices because this will affect the way in which you spend your money. Be smart, and always keep a look out.