Sunday, June 27, 2021
World’s biggest housing bubbles Austrlia, New Zealand flash 2008 GFC warnings
Jessica Yun
Tue, 22 June 2021, 8:59 am·2-min read
New Zealand has the world's worst housing bubble, according to Bloomberg. (Photographer: Mark Coote/Bloomberg)
If you thought Australia’s housing bubble was bad, it’s nothing compared to our neighbour across the Tasman, new Bloomberg data has revealed.
New Zealand has been named as the world’s “frothiest” housing market, followed by Canada and Sweden. Norway, the UK and Denmark are closely behind.
Australia is on the list too, but down in 15th place behind Switzerland and ahead of Columbia, Spain, and Greece.
(Source: Bloomberg)
Five different indicators, such as price-to-rent ratios and price-to-income ratios are used to assess a country’s ‘bubble rank’.
But Bloomberg Economics analysts believe that many of these countries are flashing alarm bells even stronger than what they were just before the 2008 financial crisis.
“A cocktail of ingredients is sending house prices to unprecedented levels worldwide,” said Bloomberg economist Niraj Shah.
“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 are all contributing.”
(Source: Bloomberg)
Will there be a global housing crash?
Shah doesn’t think so.
Though the risk metrics are even higher than they were before the GFC, we have higher lending standards in place and tighter policies ensuring the stability of the global financial system.
This time round, we’re looking at a ‘cooling’ more so than a ‘collapsing’, said Shah.
However, it doesn’t mean we’re out of the woods entirely.
“When borrowing costs do start to rise, real estate markets – and broader measures put in place to safeguard financial stability – will face a critical test,” Shah said.
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