Is the Global Housing Market About To Crash?

Ready for another global financial crisis?

According to a new report from Bloomberg Economics (via Yahoo! Finance), housing markets around the world are experiencing bubble-like trends that bear an uncomfortable resemblance to those shown in the lead-up to the 2008 financial crisis.

The report examined a number of tell-tale indicators of housing bubbles around the world, including price-to-rent ratios, price-to-income ratios and house-price growth. Many of the countries Bloomberg analyzed showed price ratios that exceed those experienced heading into the 2008 crisis.

Today’s housing bubbles are likely caused in part by factors unique to the post-pandemic landscape, including record-low interest rates, increased demand from stay-at-home workers and a historic fiscal stimulus. 

According to the report, New Zealand, Canada and Sweden show the most troubling indicators of a housing bubble, but the U.K. and U.S. also rank high on the list. 

A convergence of bubbles across multiple countries could spell big trouble for the world economy. 

...the risk is greater when there’s a synchronized boom in house prices -- as is the case in the current cycle, according to [economist Niraj] Shah.

Bloomberg points out that “the trigger for a crash isn’t obvious,” and bubbles don’t always burst — sometimes they deflate slowly. But there’s little doubt about the cause for concern. 

“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 wrote.

Related articles:

1851's picks for the best real estate franchises to buy in 2021

Why Commercial Real Estate Leases Are Not Changing (Much) After COVID-19