At particular risk in the euro area is Portugal, where house prices are 56% higher than rents and almost 47% higher than household income. In the top five are New Zealand, the Czech Republic, Hungary, Australia and Canada.
The world economy faces intense inflation, stock market turbulence, and a strenuous war. However, a further threat is looming: the unfolding of a housing bubble.
As central banks around the world rapidly raise interest rates, the rising costs of borrowing are causing people to reach their limits regarding the purchase of property.
The effects are being seen in countries like Canada, the United States, and New Zealand, where once heated residential real estate markets have suddenly cooled. It’s a sharp reversal from years of soaring prices fueled by low mortgage rates and government stimulus, with a pandemic that popularized remote working and drove homebuyers to seek larger spaces.
Bloomberg Economics’ analysis was based on 19 OECD countries and they look at ratios such as home-rent prices and home-income prices. They also look at real house price growth, nominal house price growth and housing credit growth. As for the ratios they are higher than before the 2008 financial crisis – an indication that prices have moved out of line with fundamentals.
The Top 5 worst housing markets are New Zealand, the Czech Republic, Hungary, Australia and Canada, which are the worst affected in the world and are particularly vulnerable to falling prices, according to Bloomberg Economics. Right after, especially at risk in the euro area is Portugal. Also in the euro zone are Austria, Germany and the Netherlands.
In Portugal, there are certain indicators that are worse than others, such as house prices that are 56% higher than rents and almost 47% higher than household income. Considering current quarterly data, the real price of houses in Portugal rose 11.6% and the nominal price 9.4%. As far as mortgages are concerned, this decreased by 2%.