Thursday , 9 December 2021

Bubble Ranking of World’s Frothiest Housing Markets

Bloomberg Economics says the run-up in global real estate prices over the last year…has produced a warning signal unlike any other, not seen since right before the 2008 financial crisis. 

New Zealand, Canada, Sweden, Norway, the U.K., Denmark, and the U.S. are considered the “world’s frothiest housing markets” based on a handful of factors via a Bloomberg Economics report.

Bloomberg used five indicators to construct the Bubble Ranking list of the world’s frothiest housing markets, including
  1. price-to-rent,
  2. price-to-income,
  3. real price growth,
  4. nominal price growth,
  5. and annual credit growth.

The analysis revealed that price ratios are higher than they were ahead of the 2008 financial crisis.

Source: Bloomberg 

The big spurts from the digital printing presses have resulted in housing unaffordable in OECD countries to surpass 2008 levels. The gauge of housing affordability is the average of house price-to-income and house price-to-rent indexes.

Source: Bloomberg 

Bloomberg economist Niraj Shah wrote in the report: “A cocktail of ingredients (record low-interest rates, unparalleled fiscal stimulus, lockdown savings ready to be used as deposits, limited housing stock, and expectations of a robust recovery in the global economy) is sending house prices to unprecedented levels worldwide [BUT] when borrowing costs do start to rise, real estate markets — and broader measures put in place to safeguard financial stability — will face”…downward pressure.

Editor’s Note:  The above version of the original article has been edited ([ ]) and abridged (…) for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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