Global house prices have shrugged off a succession of crises and bounced back stronger, says The Economist. True, real prices are down 5.6% from post-pandemic peaks amid higher interest rates, but that drop is much lower than many predicted. And prices are now rising rapidly again. The roots of today’s cross-country housing “supercycle” lie in the second half of the 20th century, when red tape around land use began to choke off new construction.
Across developed countries, residential construction as a percentage of population peaked in the 1960s and has since fallen to half that level today. There are no signs that the trend will slow. Interest rates are about to fall. Immigration continues to drive fresh demand in many countries. And creaking infrastructure and increasingly “torturous” commutes make it impossible to build new suburbs further out from city centres.
For all the talk of the pandemic ushering in an era of working from home, modern economies increasingly concentrate growth and job opportunities in “metropolitan hubs”, creating intense competition for limited urban housing, says Denisse López for El Pais. A prolonged slump in construction after the 2008 crisis has contributed to a global shortage, while chronic underinvestment in public housing over recent decades has exacerbated the problem.
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Half of survey respondents across the OECD group of 38 rich countries now report being “dissatisfied with the availability of affordable housing”, placing the issue ahead of living standards, healthcare and education, say Valentina Romei and Sam Fleming in the Financial Times. In the US, the average house costs 31% more than when Joe Biden took office. In England, house prices are eight times the average annual salary, more than double the ratio in 1997.
Housing markets are sliding
Though housing is in a long-term boom, higher interest rates have seen prices in major cities ease back over the past two years in real terms, according to the 2024 UBS Global Real Estate Bubble index. Property bubbles in Frankfurt, Munich, Stockholm, Hong Kong and Paris have all hissed air, with real prices down a fifth from post-pandemic peaks. Vancouver, Toronto and Amsterdam have seen 10% falls in real terms from the peak.
London prices have lost 25% of their value in real terms since the 2016 peak. The capital is given a “low” bubble risk by UBS. The Swiss bank uses metrics such as the cost of renting and a city’s own house-price history to track housing bubbles. UBS finds that, at present, the biggest risk of a bubble is in Miami. Real prices in Florida’s capital have increased nearly 50% since late 2019 amid a “booming luxury market”. Property in Tokyo and Zurich is also looking unsustainably expensive.
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