The IMF’s Global House Price Index, an average of real house prices across 57 monitored countries, continues to climb.
The index shows sixteenth consecutive quarters of positive year-on-year growth. However, house prices are not rising everywhere around the world.
Three Different Paths Since 2000
National Index vs. Major Cities
- On Australia, IMF assessment points out that house price gains have moderated. However, the extent of cooling has varied considerably across cities. The strongest price increases continue to be recorded in Sydney and Melbourne, where underlying demand for housing remains strong. With house prices still rising ahead of income, standard valuation metrics suggest somewhat higher house price overvaluation relative to the previous IMF assessment.
- On Austria, IMF assessment notes that the cumulative increase in the house price index over 2007–2015 was nearly 40 percent. To a large extent, this increase was driven by price dynamics in Vienna. The OeNB residential price index indicator, which assesses whether prices move in line with fundamental factors, points to an overvaluation of property prices of about 22 percent for Vienna, while prices in the rest of the country appear broadly in line with fundamentals.
- On Turkey, IMF assessment points out that the housing market exhibits significant variations across cities. Regional variations have been further accentuated by the presence of more than 2.7 million Syrian refugees since March 2011. Cities near the Syrian border, which have absorbed larger masses of Syrian refugees have seen significant rises in local housing prices since 2011, though they have moderated in recent years.
Figure 1 screams “global bubble” even though some countries did not participate. Australia and Canada are the the center of the bubble along with some countries I was unaware of.
China is also in a massive bubble but that’s not what Figure 2 suggests.
On January 18, Zerohedge reported China Housing Bubble Finally Pops: First Slowdown After 19 Months Of Acceleration.
Here’s an amusing China tale from Bloomberg: China’s Housing Bubble Wobble
Earlier this year, Mr. and Mrs. Cai, a couple from Shanghai, decided to end their marriage. The rationale wasn’t irreconcilable differences or even mild disagreements; rather, it was a property market bubble in China’s financial hub. The pair, who operate a clothing shop, wanted to buy an apartment for 3.5 million yuan ($519,000), adding to a couple of places they already owned. But the local government had begun, among other bubble-fighting measures, to limit purchases by existing property holders. So, in February, the couple divorced. “Why would we worry about divorce? We’ve been married for so long,” says Mr. Cai. (He requested that the couple’s full names be withheld to avoid potential legal difficulties.) “If we don’t buy this apartment, we’ll miss the chance to get rich.”
In the first eight months of 2016, according to data compiled by Bloomberg, average prices for new homes rose 28 percent in Tier 1 cities, which encompass affluent metropolises like Shanghai, and 10 percent in smaller, Tier 2 cities. The boom traces to 2014, when the People’s Bank of China began easing lending requirements and cutting interest rates. The China Securities Regulatory Commission also lifted restrictions on bond and stock sales by developers, helping them raise money for new projects.
Soon, properties were selling for ever-larger sums in government land auctions. By June 2016, China’s 196 listed developers had incurred 3 trillion yuan in debt, up from 1.3 trillion three years before. In many cities a square meter of undeveloped land is worth more than a square meter of a finished home nearby, a situation the Chinese describe as “flour more expensive than bread.”
Mike “Mish” Shedlock
Medex Man said:
Stopped reading after “IMF”. They are a bunch of clueless bureaucrats with academic degrees but no concept of the real world.
No takers for first ? Going….going…
Global bubble? Would we have it any other way?
Evidently things staying unchanged is far less desirable than even crashes.
There is no money to be made in stability.
So we think cycles are natural?
Even the ‘Gloomers’ in the chart are still level with yr 2000…. you’d think they would be happy enough with that… and prices being more affordable for new buyers…but when you realize for many property was a credit card, both in terms of work and as to skim increases in value, not surprised they are gloomy. I suppose there are some underlying parameters at work too, as in a ‘not worth paying to live there’ kind… just maybe we might end up with a few countries or parts of countries that escape a bust for a while longer as wealth escapes from the rest to them…new evolution of society in a part globalised world, urban migration, not just from the countryside to cities but from less desirable to more desirable economies and societies also….up to a point.
Don’t worry, this time is different. It will be all OK and those who don’t buy will be priced out forever! I was sad to find out that some family members think this way.
Housing is like the stock market….an investment, right? Buy and hold and if you live long enough…and the creeks don’t rise….
Wealth does not pass 3 generations.
Squatters can remain in housing despite YEARS of delinquent mortgage payments. No one is getting evicted any more than anyone will be denied Medicaid by the ACA or its’s replacement.
Financial responsibility is for suckers. Since the mortgage company did not act as a fiduciary, the property title should pass to the deadbeat occupants.
The creeks rose here in San Jose.
No matter what…shit happens. Every trend is looking for it, everything that tells us that things will never change, is inevitably WRONG.
Housing market is dependent on a booming economy, predicting the future is always hazardous but it looks like we are eaded for a severe depression.
When the booming economy becomes based on housing (with or without monetary shenanigans) … O Yay, O Yay…
I am not sure what a depression would look like nowadays. Sure, imaginary wealth will not allow itself even that, and people would be ‘ a little ‘ unhappy at having all their plans and what they are used to redesigned for them.
What is more to be wary of even would be a resulting breakdown of supply structures.That would equate to the cumulative decrease in demand working on what is a very large international framework of businesses that are fully leveraged and often politically connected. I don’t know what would happen if the whole show was thrown into contest beyond what could be deflated in a reasonable way, but then there seem to be few plans to deflate anything and it seems to be assumed that there will always be some new realm to dedicate attention to that will lift everything through. I suppose the last effort might be to just hand out money to keep people happy, but that has been tried before…as long as the above-mentioned supply structure remains near intact then maybe it is possible to mess around with monetary and legislative policy at will without too much happening, that maybe being the idea – not too much to happen, a managed endless tedium where people get too bored or disinterested to feel depressed,the whole affair becoming known eventually as a concession.
An economic concession :
Where society has become so dependent on debt based income that it trades being managed for financial alleviation.
If people buy into that privately by obtaining finance to get ahead, why would they complain at having further obligations applied to them so as not to fall behind?
When the authorities realise that a global depression is a nailed-on certainty they’ll realise too that the solution lies in ‘re-setting’ the monetary system. There’ll be endless meetings at high level between key international counterparts which will eventually result in a bank holiday lasting a week or two as the foundations of a new monetary system are laid. The insiders will be prepared in advance and (most of) the rest will be screwed, retirees in particular.
Failure to recognise the inevitable will result in the hyper-inflation that many see as inevitable.
The current boom is due to an artificial scarcity brought on by people buying houses for investments. Many of them are unoccupied. When people rush for the exits from the current bubble, it will be far uglier than any bubble popping in the past.
Stuki Moi said:
The “buying for investment” is just the blowoff top of artificial scarcity. Building bans, like land use and zoning, are where the real culprits lie.
Absent that kind of outright government sanctioned theft of tens upon tens of trillions for the benefit of the well connected, there would be no “investment” buying. Aside from the rarest of specialty properties. Kind of like cars. The occasional Bugatti or Bullit Mustang (and next door to 10 Downing street) may have been “investment grade.”
But for the rest, their value would follow trajectories similar to all non manipulated things that technology improves on over time, they would depreciate. Instead of decaying and getting less and less intrinsically valuable, but simultaneously nominally more and more so, simply because government is there to ban people from putting even a roof over their heads. Just so that the banksters and their self rationalizing sycophant army, can cash in and gain unearned influence off of the desperation of others.
FRANK STEIN said:
I DIDN’T SEE ANY WHERE THE WORDS “ADJUSTED FOR INFLATION”. SO IF INFLATION IS 10% AND THE PRICE OF HOUSING INCREASES 5%, I’D CALL THAT A LOSS.