Bubbles and the global housing market

November 1, 2013

“Fast-rising property markets are haunting the global economy again, five years after the U.S. subprime mortgage bubble burst and triggered the worst financial crisis since the 1930s,” Reuters reports. Still, ”the warning signals are flashing amber, not red, and several countries have acted to cool overheating markets,” Alan Wheatley and Tim Reid report.

The US housing market has been held back by tight mortgage standards, an unemployment rate of 7.2% and stagnant wages. In Canada, however, home price-to-income ratios are at the highest levels in 10 years, and many European countries have higher than average price-to-income ratios.

 

Prices compared to both rents and incomes are much higher in France, Spain, and the UK than in the US and Germany.

In China, prices are “40 percent more affordable on average than in 2000″ according to Reuters, but it’s a different story in big cities like Shanghai and Beijing. From the Reuters story:

Prices nationwide rose on average by 9.1 percent in the year to September but surged 16 percent in Beijing and 17 percent in Shanghai.

“There are overheating signs in Tier 1 cities. The central government should take some measures, at least including stricter implementation of existing measures,” said Wang Juelin, a former senior housing ministry researcher.

Demand by Chinese buyers has helped boost Hong Kong prices by 120 percent since 2008.

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