Every year, the doom mongers come out in force and say the <a href="https://www.thenationalnews.com/business/money/2021/10/25/what-does-rising-inflation-mean-for-global-property-prices/" target="_blank">global property bubble</a> is finally set to burst and every year it doesn’t. This cycle has been repeating itself since before the global financial crisis and it has been the same story in 2021, too. Even the Covid-19 pandemic has failed to dampen people’s appetite to own property and may even have fuelled it. Lockdown restrictions have driven a “<a href="https://www.thenationalnews.com/business/property/2021/08/18/demand-for-villas-in-uae-rises-as-residents-seek-bigger-homes-amid-pandemic/" target="_blank">race for space</a>” in many countries, forcing prices even higher. Yet nothing lasts forever and there are reasons why 2022 could be sticky for global property markets. As the fast-spreading <a href="https://www.thenationalnews.com/business/money/2021/12/02/omicron-market-meltdown-how-worried-should-investors-be/" target="_blank">Omicron variant</a> threatens yet another round of lockdowns, many could be reluctant to commit to a new property. Inflation is a bigger worry, though, with <a href="https://www.thenationalnews.com/business/economy/2021/12/10/us-consumer-prices-accelerate-at-fastest-annual-rate-in-almost-four-decades/" target="_blank">consumer price growth </a>hitting 6.8 per cent in the US, 6 per cent in Germany and 5.1 per cent in the UK. Everybody knows today’s property values have been pumped up by more than a dozen years of cheap finance. Affordability is an issue, with <a href="https://www.thenationalnews.com/business/money/2021/12/16/homefront-is-a-rent-to-own-scheme-better-than-a-property-mortgage/" target="_blank">mortgages</a> hovering around the 2 per cent mark. They may not stay that low for long, with the Bank of England becoming the first major central bank to lift interest rates on December 16, albeit to just 0.25 per cent. If others follow and mortgage rates steadily climb, demand would slump. So, dare you take the plunge and buy a property today? Or do you sit back and wait to pick up a bargain after the long-awaited crash? It’s a tough call. The big global cities have weathered the Covid-19 storm in surprisingly good shape. They remain centres of “collaboration, innovation and prosperity”, global real estate specialists Savills says. It ranks New York as the world’s “most resilient city”, followed by Los Angeles, London, Tokyo, San Francisco and Paris. Cities are also becoming greener and more liveable, while the concept of the car-free 15-minute city is gaining traction. Forget the lure of the countryside, cities are where the money is. Urban areas produce more than 80 per cent of global gross domestic product, according to Oxford Economics. That will hit 90 per cent by 2030. Prime property prices will rise in 2022 but the rate of growth will soften, Kate Everett-Allen, head of international residential research at <a href="https://www.knightfrank.com/research/article/2021-11-22-global-prime-residential-price-forecast-miami-on-top-in-2022" target="_blank">Knight Frank</a>, says. Prime global <a href="https://www.thenationalnews.com/business/property/2021/12/14/uae-property-prices-set-to-rise-in-2022-amid-government-initiatives-experts-say/" target="_blank">property prices</a> should rise 9 per cent this year and then climb another 7 per cent in 2022, Ms Everett-Allen says. “Behemoths like New York and London look to be awakening from their slumber, with the pace of prime sales quickening and growth moving into positive territory for the first time in three and six years, respectively.” Prime residential prices in Miami grew a world-beating 22 per cent this year and it will lead the pack in 2022, with prices expected to rise 10 per cent. “Florida’s low tax regime, Miami’s competitive prices and the appeal of coastal living during the crisis has boosted demand,” Ms Everett-Allen says. Second-placed Sydney should grow 9 per cent as second home buyers favour property on Australian soil, having been hit by lockdowns and travel bans. Los Angeles should grow 8 per cent due to “record low inventory levels, strong demand for large family homes and the continued availability of low mortgage rates”, Ms Everett-Allen says. Auckland and London (up 7 per cent), Geneva and Madrid (6 per cent) and Singapore, New York and Hong Kong (5 per cent) should also perform strongly. Positive factors include strong demand for second homes from buyers flush with lockdown savings and the low supply of attractive property, she adds. Interest rates may rise but this will not trouble prime markets, where many buyers complete purchases in cash. Potential headwinds include tax raids on the better off, reduced fiscal and monetary stimulus, and local measures designed to cool overheated property markets and prevent wealthy foreigners from driving out the locals. China is the major concern, Ms Everett-Allen says, as the country’s second-largest property developer <a href="https://www.thenationalnews.com/business/2021/12/09/fitch-downgrades-evergrande-and-declares-developer-in-default-as-restructuring-looms/" target="_blank">Evergrande</a> collapses under the weight of its $300 billion debts. “This is unlikely to kickstart widespread contagion but the direction of policy suggests more muted price growth in the medium term.” Other forecasters are also bullish. For example, <a href="https://www.zillow.com/research/home-values-sales-forecast-oct-2021-30306/" target="_blank">Zillow </a>predicts US residential property prices will climb 13.6 per cent in the year to October 2022 (although that’s down from a thumping 19.9 per cent in August). So much for predictions. The question is whether you should buy in this market. The answer is yes, provided you know what you are doing and why, Miranda John, director of international property finance at SPF Private Clients, says. While mortgage finance is still cheap, lenders typically demand a sizeable deposit. “Many lenders, particularly in Europe, will only advance up to a maximum of 50 to 70 per cent loan-to-value.” Buyers must also meet strict affordability criteria and budget for purchase fees and local taxes, which can total 12 per cent of the purchase price, she says. Plus, if you are buying overseas, remember to account for foreign exchange risk as adverse movements could push up the cost of servicing a mortgage or managing your property, Ms John adds. Borrowers also need to brace themselves for higher interest rates in 2022. They must be sure they can afford to service their mortgage, Islay Robinson, chief executive of high-net-worth mortgage broker Enness Global, says. With interest rates expected to rise in 2022, the sooner you organise your finance, the better, he says. “This is particularly applicable for anyone buying off-plan as it is often possible to secure mortgages very early for new build developments.” Mortgage rates cannot get lower but they can get a lot higher and fixing for five, 10 or even 15 years could prove highly tempting. “We have already seen long-term fixed-rate mortgages get gradually more expensive over the last few months,” Mr Robinson says. Everything now hangs on where mortgage rates go next. As inflation spirals, central bankers are being forced to drop the illusion that price growth is “transient”, Fawad Razaqzada, market analyst at Think Markets, says. Yet the US Federal Reserve remains reluctant to raise interest rates. “Currently, markets expect two rate hikes in 2022, but if the Federal Open Market Committee plots a more aggressive tightening cycle, markets could be in for a surprise,” he says. Like everything else right now, a great deal depends on Omicron. It could actually help the property market by forcing central banks to delay rate hikes. Higher interest rates may slow soaring house prices but the impact may be lower than many anticipate, Karen Noye, mortgage expert at global wealth manager Quilter, says. “Even if rates are hiked, demand for property still outweighs supply, so we would likely see a gradual slowing of growth as opposed to a sudden drop.” If she’s right, the global property market crash could be delayed for yet another year. The one threat is that inflation lets rip, forcing central bankers to taper stimulus and hike rates, which would knock property market confidence. Buying a property is always a gamble but if you find the home of your dreams, there’s little point hanging around. Don’t buy to make a short-term profit, but choose something you would be happy to own for years and years to allow time for prices to recover from any crash. Don’t borrow more than you can afford to repay, even if interest rates do rise. If worried, fix your mortgage at today’s record low rates while they last.