- The global housing boom that has propped up the world
economy in the face of falling share markets in the past few years is teetering
on the edge of a crash, The Economist has concluded.
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- Pam Woodall, economics editor of the British weekly,
said it had conducted global housing surveys and sector research over the
past year.
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- "House prices look seriously overvalued in Australia,
Ireland, the Netherlands, Spain, Britain and the US and will fall by at
least 20 per cent in many economies over the next four years," Woodall
told a conference organised by Investment Property Databank.
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- The trigger for a crash could be a relatively modest
increase in interest rates as total levels of household debt were at record
highs fuelled by borrowing and housing equity withdrawal on the back of
historically low rates.
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- Woodall said it was a fallacy to assume rate rises on
the scale of the late 1980s would be required to hit house prices as the
major indicator for the residential market - the ratio of house prices
to average income - was at record highs in the US, Australia and Britain.
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- The US had had the biggest rise in house prices in its
history since the mid-1990s, and a sharp fall in the market in the largest
global economy would tip the world into recession.
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- "The US has very little fiscal or monetary ammunition
left to support its economy if house prices collapse," said Woodall.
"If the US falls it would be the first global property bust in history."
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- She said property was the biggest business in the world,
accounting for 15 per cent of global gross domestic product, with assets
of US$50 trillion ($76.5 trillion) compared with US$30 trillion in shares.
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- So swings in house prices had a much bigger impact on
economies than fluctuations in stock markets.
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- The ratio of house prices to rents was also at record
highs in the Anglo-Saxon economies as rents had risen much more slowly
than prices and in some cases were falling.
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- The situation in the rental sector also gave the lie
to a common assumption that a fixed supply of land and a rising population
meant prices would always rise, she said.
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- "If this is true wouldn't you expects rents to rise
as well?" Woodall said.
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- http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=35555
70&thesection=business&thesubsection=economy&thesecondsubsection=world
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