The residential property bubble continues in countries like the UK and Sweden, but it seems to have spread to some other countries as well, according to data from the Bank for International Settlements.
In his last budget before the May 7 election, Chancellor George Osborne offered more subsidies for those wanting to buy homes, signalling that the government is ready to do anything to keep the residential property bubble going.
There are many who argue that there is no bubble in UK property prices and that supply and demand, instead of speculation, are the factors that support the high prices.
However, as the data put together by the BIS illustrates, the UK together with Sweden – another market about which there have been warnings of a dangerous residential property bubble – have shown disproportionate rises in home prices.
The data is old for some of the countries on the list, notably the UK, but it helps with the comparison.
Prices for residential properties continued to increase in most advanced economies outside the eurozone in the third quarter of last year, the BIS report shows.
But while home prices rose by 4% in the US, 7% in Australia and 3% in Canada, they jumped by 10% in the UK and by 11% in Sweden.
Among developed economies, Japan was a notable exception: prices there continued to fall, shrinking by 4% in the third quarter of last year.
It is obvious from the chart that prices in the UK are advancing at a much faster pace than prices in developing countries where the population is increasing more quickly and which start from a very low base, such as India and Turkey.
In the eurozone, housing prices were overall stable, but the fragmentation that exists when it comes to growth or interest rates for commercial loans manifests itself in residential property too.
Ireland seems to be headed back towards a residential property bubble, possibly due to its strong recovery post debt crisis; Irish home prices increased by 15% in the third quarter.
Another member of the so-called PIIGS – a market acronym dating back to the beginning of the eurozone debt crisis, grouping the most at-risk countries — Portugal, saw an increase of 5% in real residential property prices, while in Germany they increased by 2%.
By contrast, house prices in Greece saw a significant decline, of 6%. In Italy they fell by 4%, while in France there is no residential property bubble either: house prices fell by 2% in the third quarter of last year.
Fragmentation can be seen in emerging markets too. China’s residential property bubble is over, as prices fell by 2%, in sharp contrast with increases of 12% recorded since mid-2012 in that country. In Singapore, prices fell by 5%.
Perhaps this partly explains the continued rise in London home prices, as investors fleeing weakness in Asia and other emerging markets are trying to find refuge in the British capital, which is perceived as a safe haven.
In Central and Eastern Europe, property prices fell by 6% in Russia and by 3% in Romania, which still deals with a severe correction after a huge residential property bubble inflated just before the country joined the EU in 2007 burst in 2009.
In Poland, residential prices saw a modest increase of 2%, while in Turkey and Israel they rose by 5%.