Warning! Bubble trouble is coming

Source: Bloomberg

As we may or may not notice, the global housing markets are flashing the kind of warnings that have been seen before the 2008 financial crisis. 🏠

What?! 😱 The 2008 style warning?

The 2008 financial crisis featured the burst of US housing bubble. Before bursting, its house prices more than doubled from 1998 to 2006.

Now, housing prices around the world are surging to unprecedented levels. The below factors could explain this:

  • Supportive policies in response to COVID-19: ①Record low interest rates, ②Massive fiscal stimulus
  • Supply-demand imbalance: ①People save more during the lockdown, adding to their deposits (less entertainment, less shopping?😂); Stay-at-home workers also need more space; ②Limited housing stock under the pandemic; 
  • Others: Economic recovery hopes.

Which country’s housing market is the frothiest?

The top 3 are New Zealand, Canada and Sweden, while UK and US are also near the top, per Bloomberg Economics (the detailed ranking is 👆).

  • UK housing market on fire: Its house prices recorded double-digit growth for the first time since 2014 last month, the strongest in 7 years. 

Why are Hong Kong and Singapore not on the list?

When I saw this ranking, I had the same question as you do. In fact, it’s just because the study mainly focuses on member countries of OECD (HK & SG excluded). But house prices there are also rising 📈

  • 1st in Asia: Singapore posted the biggest price gain in Asia at 6.1%; South Korea is at No.2 at 5.8% and Japan follows with 5.7%. 
  • Hong Kong, the world’s priciest property market, also saw a 2.1% growth.
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