Earlier this week, the NYT discussed how the Real Estate boom had become a global phenomenon. Picking up that meme, both the WSJ and The Economist jump on board:

The WSJ notes the rapid price appreciation:

"Over the past three years, measures of housing values are up 48% in France, 63% in Spain and they’ve nearly doubled in South Africa, according to data gathered from these markets from sources including the Bank for International Settlements, Economy.com and The Wall Street Journal. In just the past year, prices have risen 19% in Hong Kong and 48% in Bulgaria. They’ve also boomed in China, Australia and the United Kingdom, though prices are now showing signs of slowing in some markets like Australia and the U.K."

"I’m worried about a world recession when this thing finally unravels," says Robert Shiller, a Yale University professor and author of the book "Irrational Exuberance."

The Economist takes it a step further, and declares it a bubble about to burst:

"NEVER before have real house prices risen so fast, for so long, in so many countries. Property markets have been frothing from America, Britain and Australia to France, Spain and China. Rising property prices helped to prop up the world economy after the stockmarket bubble burst in 2000. What if the housing boom now turns to bust?

According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries’ combined GDPs. Not only does this dwarf any previous house-price boom, it is larger than the global stockmarket bubble in the late 1990s (an increase over five years of 80% of GDP) or America’s stockmarket bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history."

While I have staked out the contrarian position that housing isn’t a bubble (yet), I am cognizant of increasingly ominous warning signs.

Note the parallel between the US (2005) and Japan (1989):

click for larger graphics
Csf103_2

We know that both Australia and the UK prices have topped and started to withdraw; That’s visible in the ratio Sale prices to Rents (but not in the US):   

Csf107_2

Note that this 3rd chart is particularly misleading — the year-over-year change in price increases shows housing markets are cooling off — not
super-heating:

Csf110_2
Charts courtesy of The Economist

 

Regardless, of your perspectives as to bubble or no bubble, this all makes for interesting reading. I find this WSJ table of global real estate appreciation absolutely fascinating:

STICKER SHOCK

Home-price appreciation for 27 countries over the past year and three years.

Rank Country One-Year Change Three-Year Change
1 SOUTH AFRICA * 28% 95%
2 CHINA (Shanghai)*  27% 68%
3 SPAIN * 17% 63%
4 AUSTRALIA * -3% 56%
5 NEW ZEALAND ^ 16% 55%
6 UNITED KINGDOM * 11% 50%
7 FRANCE * 15% 48%
7 IRELAND ^ 13% 42%
9 CANADA * 10% 31%
10 UNITED STATES * 11% 29%
11 THAILAND * 13% 29%
12 SWEDEN * 10% 27%
13 HONG KONG * 19% 27%
14 HUNGARY(Budapest)* 5% 27%
15 FINLAND * 6% 23%
16 EURO AREA * 7% 22%
17 GREECE (Ex-Athens)* 4% 22%
18 KOREA * -2% 20%
19 NORWAY * 10% 17%
20 DENMARK ^ 9% 17%
21 TAIWAN * 10% 15%
22 NETHERLANDS * 5% 11%
23 SWITZERLAND * 1% 8%
24 PORTUGAL * 0% 3%
25 GERMANY * -3% -5%
25 JAPAN * -5% -16%
26 BULGARIA * 48% NA
27 INDONESIA ^ 5% NA
*Based on latest available statistics updated through fourth quarter 2004 or first quarter 2005.

^Based on statistics updated between second quarter and third quarter of 2004. Percent changes are calculated using city or national indexes of residential property prices, home prices, existing home prices or prices per square foot.

Sources: Bank for International Settlements, Economy.com, CEIC, and Wall Street Journal Research.

 


Sources:

The global housing boom
In come the waves
The Economist, Jun 16th 2005
http://www.economist.com/printedition/displaystory.cfm?story_id=4079027

Amid Low Rates, Home Prices Rise Across the Global Village
Armed With a ‘Saving Glut,’ Investors Chase Returns;
Londoners Buy in Bulgaria, Bangkok Market Is Hot — Again

Jon E. Hilsenrath and Patrick Barta
The Wall Street Journal, June 16, 2005; Page A1
http://online.wsj.com/article/0,,SB111887057779860749,00.html
>

Category: Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Global Real Estate Boom”

  1. Andy Nardone says:

    Does this global data put a stake in the heart of “localized bubbles?” Sure, local job markets/economies and land use regs play into this, but low rates cut across the board. While Peoria isn’t NYC, Peoria real estate has changed to reflect 5% mortgages, i/o mortgages, 125% financing etc. This stuff is national, and apparently global as well.

    I didn’t comment on it, but during your “roundtable” debate the other day you seemed to give up considerable ground on your contrarian position. To wit “…”I suspect that may end badly also” in reference to real estate.

    While it made me laugh it is certainly consistent with your philosophy of being able to adapt your thesis. I applaud that.

    What’s just as funny though is that I find my “bubble” position giving ground. I am wrestling with the idea that rates are low and may stay low for an extended period of time. I thought Howard Simons’ article answering Greenspan’s “conundrum” was terrific (does he write anything that isn’t?). Though, I did have to cross reference his article with some other material just to digest the bond talk. Geeks!

    While I waver, at the end of the day my gut (which I don’t trade on) continues you tell me that Mr. Market won’t stand for this many people being on the right side of this trade. The market likes to go where it’s going with the least number of people along for the ride.

    We’ll all stay tuned…

  2. mh497 says:

    Nobody trusts their currency anymore.

  3. royce says:

    Seems like the further prices rise above rents the more likely they’ll come back to ground. Right now a big portion of buyers assume homeownership is always cheaper in the long run than renting and that a home always appreciates substantially in value.

    Those are two big props holding up prices. If they somehow get kicked out, prices will fall. By how much is the trillion dollar question, though, isn’t it?

  4. fatbear says:

    Look on the bright side – we obviously won WWII, as Japan and Germany are seeing housing price declines.

    Is the smart bet to go long housing in those two markets?

  5. Ibrahim says:

    We are searching for real buyers for the property in free zone area of Dubai or want to make worth investment for Business in Dubai.

    We can help in so many fields.

    There is a boom of foreign buyers in Dubai as prices shoots up very fast .So to buy property from business point of view is the best investment, as within a year it becomes near about double.

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  6. Ibrahim says:

    We are searching for real buyers for the property in free zone area of Dubai or want to make worth investment for Business in Dubai.

    We can help in so many fields.

    There is a boom of foreign buyers in Dubai as prices shoots up very fast .So to buy property from business point of view is the best investment, as within a year it becomes near about double.

    Real estate business is very flourishing business in Dubai now a days.

    Therefore we request you to kindly take interest for such a nice business.

    With Regards,

    Ibrahim Shyam Mobile no – 00971-50-3036594

  7. Ibrahim says:

    We are searching for real buyers for the property in free zone area of Dubai or want to make worth investment for Business in Dubai.

    We can help in so many fields.

    There is a boom of foreign buyers in Dubai as prices shoots up very fast .So to buy property from business point of view is the best investment, as within a year it becomes near about double.

    Real estate business is very flourishing business in Dubai now a days.

    Therefore we request you to kindly take interest for such a nice business.

    With Regards,

    Ibrahim Shyam Mobile no – 00971-50-3036594

  8. Mabelle says:

    Real Estate Market Boom in New Orleans

    In New Orleans, a $175, 000 can promise you a bargain of 2, 200 square foot home 3 spacious bedrooms, two bathrooms.

    The National homebuilder KB Home acquired 58 finished lots in New Orleans, as well as a 3,000-acre parcel in Jefferson Parish, a neighboring suburb.

    Instead of going through the hassle of renovating their homes, many people decided to buy in the city’s less damaged neighborhoods. This resulted to fueled sales in the market.

    In the areas that were flooded, the signs ‘”for sale” is everywhere. This also results to high percentage of homes for sale in the city.

    Mabelle
    Miami Real Estate

  9. Dwayne says:

    Anyone have any take on real estate in the Greek Islands or possibly even Paros?

    It looks to still be a good value in certain markets, but wondering if there are also signs of slow down due to Europeans buying fewer vacation homes.

    Dwayne