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The UK Property Market Boom compared to World Property Markets

Housing-Market / Analysis & Strategy Nov 07, 2006 - 11:02 PM GMT

By: Nadeem_Walayat

Housing-Market

As the UK property market continues to shrug aside higher interest rates and march higher, we take a look at what could be in store given the performance of property markets in major economies from around the world.

US Property Market - The bubble across the atlantic has most definitely popped, with prices forecast to fall a further 10% during 2007. It could take the US 5 years to recover from this slump with fallout expected to hit to the US economy and leave it vulnerable to external shocks such as if oil prices took off again.


Australian Housing Market - The australians have experienced a 10 year boom in house prices to December 2005, after which rising interest rates have soon damped down house price growth. After an initial sharp drop of some 6%, house prices are forecast to grow by 2% during 2007, with a chance that they could go lower if interest rates rise further than the recent hike to 6.25% ! The problem is that inflation is rising strongly at 3.9% and future rises in interest rates cannot be ruled out despite the weak housing market.

Japanese Housing Market - Virtually everyone is aware of the great depression in Japanese Property market, that has experienced 16 straight years of declines ! Now finally, the housing market is showing signs of bottoming out, BUT it won't overnight turn into a raging bull market, but take several years to build a base. A lot of speculative monies have already flowed into REITS driving PE ratios into the 30's making the market not exactly cheap, and thus to some degree the stock market is discounting a rise in house prices.

German Property Market - Germany, similar to Japan has experienced house price deflation resulting in relatively cheap houses with record high yields. A weak economy until relatively recently with high unemployment, bribery scandals, and a reluctance from the population to invest in property have meant that buying and selling has become a matter of necessity rather than interest. A relatively small number of Germans actually own their property (42%) in comparison to the UK (71%) and Spain (89%), Europe's biggest home owners. The German property market represents an ideal get in at the ground floor, the best way and the best way in is via REITS.

The worlds property markets probably follow the sequence of - Germany at the trough of a bottom, Japan already gearing up for rising prices, the UK at the crest of a boom, and the USA passed the boom and well on its way down. Can the UK housing market defy gravity ? I very much doubt it, as it is never 'different this time'.

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Comments


08 Nov 06, 08:25
Re: The UK Property Market Boom compared to World Property Markets
At the end of everyboom, people say its different this time ;)

Just as it seems you are too :)

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