Housing Bubbles Around the World; Severe Corrections Still to Come in Canada, Australia, China, Sweden & Belgium

posted by Nima

May 16, 2010 · Posted in Global Economics

The Economist has a great interactive chart with home prices around the world.

A comparison of home prices to average income over the past 35 years in different countries:

Another chart gives us information about a few other countries, but data only goes back to 2001 for this comparison:

One thing I noticed in the chart was that Germany and Switzerland are the only countries where absolute home prices AND home prices in relation to average incomes have been declining constantly, at least for as long as data is available:

For Switzerland the available data actually goes back as far as 1991, with prices having constantly declined in relation to average incomes since then. For Germany data goes back to 2004 only. It seems like a bubble never really developed in these countries. Thus Germany and Switzerland may be interesting markets for global property investors at this point.

In Spain, Britain, Ireland, and South Arfica home prices still have a very long way to come down.

Other countries haven’t even yet begun to see the beginning of any meaningful correction in home prices, most notably Canada, Australia, China, Belgium, and Sweden.

People in those countries won’t be immune to the problems associated with building more houses than needed and/or can be afforded. Thus, expect significant corrections to begin soon in cities like Sydney, Melbourne, Vancouver, Toronto, Montreal, Stockholm, Shanghai, Beijing, Brussels, and the like.

The recent plunge in Beijing property prices may be a wake-up call for global property markets.