Economics

Free exchange

Global house prices

Clicks and mortar

Mar 3rd 2011, 12:32

Our interactive overview of global house prices and rents

 

Is housing the most dangerous asset in the world? Any explanation of the recent financial crisis would have the property boom in America as Exhibit A: according to Robert Shiller, an economist and bubble-spotter, house prices were virtually unchanged in real terms between 1890 and the later 1990s, before almost doubling in the ten years between 1997 and 2006. Because buying a house usually involves taking on lots of debt, the bursting of this kind of bubble hits banks disproportionately hard. Research into financial crises in developed and emerging markets shows a consistent link between house-price cycles and banking busts.

The Economist has been publishing data on global house prices since 2002. The interactive tool above enables you to compare nominal and real house prices across 20 markets over time. And to get a sense of whether buying a property is becoming more or less affordable, you can also look at the changing relationships between house prices and rents, and between house prices and incomes.

You must be logged in to post a comment.
Please login or sign up for a free account.
1-20 of 45
RaptorNXT wrote:
Oct 13th 2010 12:18 GMT

Can someone please add India and Brazil to the list?

Oct 13th 2010 12:52 GMT

demand for shelter is inelastic - demand to *OWN* one's shelter is less inelastic, but the availability of rental stock in terms of quality/location compared to "owned" via mortgages, in canada at least, is an issue - in my locale, residency is more available via purchase than renting, again, for same quality/location - if times become tough enough, then folks will indeed sacrifice on qualitatives and price wrt shelter - i think demographics portends ill wrt household formation for the G7, unless tech can offer oldsters extended residency outside of group/old-age homes

Marco82 wrote:
Oct 13th 2010 1:00 GMT

Is your home just about the riskiest investment asset there is? In times like this, you’d have to say yes. So the sooner more people realise that, and stop thinking their home is their castle is their financial ‘nest egg’, the better. http://www.mindfulmoney.co.uk/1913/economic-impact/realistic-homeowners-...
Schroders reckons that transformation is under-way; not sure it is yet.

rjs0 wrote:
Oct 13th 2010 2:02 GMT

what software does one need to view the interactive?

ghaliban wrote:
Oct 13th 2010 3:08 GMT

this tool tells us:

In the UK,

- between 1975 and 1980, house prices more than doubled;
- between 1981 and 1990, house prices more than doubled again;
- between 1991 and 2000, house prices went up by 1.5 times;
- between 2001 and 2010, house prices have doubled again.

How exactly you infer this makes houses dangerous assets I'm not sure. I'm feeling too lazy but it would be nice if someone could do the same analysis as above for the US and France/Germany, and also compare with the returns that you could have obtained from (say) the FTSE over the same periods.

Seize the day, boys. And follow the data.

jouris wrote:
Oct 13th 2010 3:17 GMT

Anyone got a like to Shiller's paper (column? blog?) on real house prices since 1890? Curious both to see it, and to see what locations he was looking at.

Macinta wrote:
Oct 13th 2010 3:53 GMT

ghaliban wrote: "this tool tells us... house prices more than doubled... How exactly you infer this makes houses dangerous assets I'm not sure."

Those are only nominal prices. You need to adjust for inflation. I only checked the first time period you cited as doubling (1975 - 1980 in the UK), but there real house prices were flat. So the doubling you cite wasn't an appreciation in house values but a decline in the pound.

jouris wrote: "Anyone got a like to Shiller's paper (column? blog?) on real house prices since 1890?"

It's in his book "Irrational Exuberance 2nd Ed." The book is excellent and I highly recommend it. He also has the data posted on the book's companion website: http://www.irrationalexuberance.com/

AfroPix wrote:
Oct 13th 2010 3:55 GMT
rewt66 wrote:
Oct 13th 2010 6:06 GMT

rjs0:

It says that you need Adobe Flash Player 10. Which I have, and I can't view it either.

bampbs wrote:
Oct 13th 2010 7:13 GMT

Buy a house because you love it and can afford it.

Sense Seeker wrote:
Oct 22nd 2010 12:07 GMT

This is very interesting. But it's all about the past. It is hard to conclude from this that buying a house is a bad investment. For that, you'd have to make predictions about the future.

nschomer wrote:
Oct 22nd 2010 2:12 GMT

@bamphs
Exactly right. My house will never decline in value, because I never intend to sell it, and it is quite valuable to me, my wife, and my children. Boo hoo that some people bought houses as investments and havn't realized the returns they thought they could count on, such are the risks of investment. The bursting bubble is also comeuppance for those who served to drive the price of homes beyond the reach of many middle class Americans with their speculation, it is unfortunate that some of these working/middle class didn't see the bursting bubble coming and mortgaged their futures to provide a home for their kids they couldn't quite afford.

peace-loving wrote:
Oct 22nd 2010 4:15 GMT

Very nice chart.

Martin456 wrote:
Oct 22nd 2010 9:41 GMT

Looks like Australia is the market to short there. Or even better, the Australian banks. Here in Oz people still think house prices can't go down.

harmsworth wrote:
Oct 23rd 2010 12:18 GMT

Whatever software is required I guess I don't have it. Nor do I need it. The software between my ears told me that house prices were out of line in 2006 already so I sold my house and am renting. The money I released is about to be put into a business.I am in Canada where we pretty much dodged the financial crisis but our house prices have escalated pretty dramatically in the last few years. Here is the problem as I see it. Interest rates went to very low levels for technical reasons and some mismanagement by the Fed. This led to a classic asset bubble in real estate. This bubble was not picked up on the inflation radar because housing costs are measured based on overall financing costs. Also wilful neglect by the Bush administration and the Fed. This means that the actual house prices were masked by low interest rates. People felt richer and borrowed against their mortgages. More debt, more exposure to economic or personal finance issues.Voila, Monsieur, your disaster is served.

As I see it, there is no reason why this sort of problem cannot be headed off by central banks and/ or governments. High rates of economic growth should result in higher taxes. I suggest that shortfalls in pension obligations be made up with surcharges any time GDP growth exceeds an accepted target and interest rates should go up based on straight dollar value of housing. The second task can be assigned by mandate to the central bank and the first can be assigned by mandate to an independent pension oversight body. Just as monetary policy has been removed from the hands of the politicians, we would benefit by removing some aspects of taxation policy from the lying cretins. This would be a first step and could be followed by requiring all new spending proposals to be vetted for net benefit by an independent agency. Removal of some borrowing authority next. The evolution of democracy.

harmsworth wrote:
Oct 23rd 2010 12:25 GMT

Some people on here are pretty smug about the fact that they will not lose their house and inherent value. One wonders how they might feel if they lost their job and health care coverage. We can all be vulnerable when the bad winds blow.

TomJx wrote:
Oct 23rd 2010 12:27 GMT

In the United States, tilting the playing field to the only game in town not subject to capital gains is what caused the bubble, imo.

July 1978:
Section 121 allowed for a $100,000 one-time exclusion in capital gain for sellers 55 years or older at the time of sale.

1981:
The Section 121 exclusion was increased from $100,000 to $125,000.

July 1997:
The Taxpayer Relief Act of 1997 repealed the Section 121 exclusion and section 1034 rollover rules, and replaced them with a $500,000 married/$250,000 single exclusion of capital gains on the sale of a home, available once every two years.

harmsworth wrote:
Oct 23rd 2010 12:27 GMT

Some people on here are pretty smug about the fact that they will not lose their house and inherent value. One wonders how they might feel if they lost their job and health care coverage and then their health. I'm not saying they should save the speculators but we can all be more vulnerable than we like to think when the bad winds blow.

harmsworth wrote:
Oct 23rd 2010 12:35 GMT

TomJx adds something I did not know that sounds relevant. Also, mortgage interest deductability always seemed to me to be an invitation to put more money into housing than was prudent. Whatever the mix of causes it's a lot of pain so I think everything should be on the table to try to prevent a recurrence. Since this appears to be pretty much a worldwide problem, countries should try to learn from each other.

Andrew Dundas wrote:
Oct 23rd 2010 3:49 GMT

Within both UK and USA, regional and State level house prices trends diverge. In the UK, more than half the market by value is in the London region and where population growth is consistently fastest.
Wouldn't regional analyses within these two important country markets provide indications of the relative impacts of household incomes and local supply restraints on real price changes?

1-20 of 45

About Free exchange

In this blog, our correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts.

Advertisement

Advertisement

Latest blog posts - All times are GMT
Et tu, Zagreb?
From Eastern approaches - 1 hrs 18 mins ago
A pointed resignation
From Newsbook - March 6th, 9:47
Trains and partisanship
From Gulliver - March 5th, 20:49
Opponents unknown
From Multimedia - March 4th, 22:30
More from our blogs »
Products & events
Stay informed today and every day

Subscribe to The Economist's free e-mail newsletters and alerts.


Subscribe to The Economist's latest article postings on Twitter


See a selection of The Economist's articles, events, topical videos and debates on Facebook.

Advertisement