Sources: Australian Bureau of Statistics, Land
Registry, FHFA, INSEE.
When it comes to investment, one obvious place to put
money is in bricks and mortar. Despite the global financial crisis (GFC),
house prices have continued to rise in some of the world’s largest
economies. So much so that in mid-June the IMF warned of property bubbles in
Australia, Belgium, Canada, New Zealand and to a lesser extent, France1. In
fact, looking at figures from four major countries alone, there has been a
sharp rise in housing markets in all but the struggling US.
Boomers: United Kingdom
Also in June, the Deputy Governor of the Bank of England, Sir Jon
Cunliffe, raised concerns that there was a British tendency to buy houses as
soon as people felt their income was increasing, or indeed felt there was a
chance it would increase. This habit, he suggested, meant that supply could
not keep up with demand. He was therefore worried that, as house prices
surge, household debt could be set to rise yet again2.
Source: Office for National
Statistics.
One tell-tale sign in the UK is the large increase in the
number of people working in the real estate sector. Between Q1 and Q2 2013
alone, there was a 9.9% rise in the number of real estate workers3. This was
not just a one-off either, nearly 100,000 more people now work in real
estate than in March two years ago.
Whilst it’s true that, as reported by the UK press4, prices in London have
increased significantly, the capital cannot take the entire blame for this
trend. As the chart demonstrates, the two largest urban conglomerations
outside London have also seen rises.
Boomers: Australia
Australia has been experiencing a house-price bubble for several
years. Key economists, such as Steve Keen5, have long since been sounding
the warning bells that a burst will come; and when it does it will be
devastating. Over two years ago I suggested to CNBC that Australia’s huge
credit bubble would at some point burst - possibly pricked by poor results
in the Chinese economy, making the Australian dollar and perhaps the banks
and property market drop in price6. That hasn’t happened yet, as Chinese
economic results have so far stood up over the last couple of years, but
Australia’s heavy reliance on the Asian giant means the Sword of Damocles
still hangs above its markets.
Source: Land Registry.
Looking solely at the property market, since the dip in
2008, Sydney area prices have increased by over 40%. However, Brisbane and
Melbourne continued augmenting without experiencing anything close to a dip:
over the last ten years the former’s house prices have increased by almost
53%; the latter’s by a huge 84%.
To be continued…
Source : ABS.
Footnotes:
1
http://www.lesechos.fr/monde/europe/0203561280927-le-fmi-craint-une-bulle-immobiliere-en-france-1012176.php
2
http://www.telegraph.co.uk/finance/bank-of-england/10931956/Jon-Cunliffe-UK-property-obsession-threatens-to-push-up-household-debt-pile.html
3
http://www.ft.com/intl/cms/s/0/866e87c0-1af0-11e3-a605-00144feab7de.html#axzz36Nx2bapT
4
http://www.bloomberg.com/news/2014-07-15/u-k-house-prices-rise-as-london-surge-hits-record-ons-says.html
5
http://www.debtdeflation.com/blogs/2014/04/08/a-sudden-conversion-of-property-bubble-doubts/
6 http://www.cnbc.com/id/47290031#.
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