Below is a chart of 11 developed-market home price indices indexed to 100 as of Q1 2000. The data is taken from the Dallas Federal Reserve’s analysis of global home prices, and uses the real prices of homes: prices adjusted for inflation using the PCE deflator for each country in question.
The above chart is a bit hard to read, so we’ve parsed it out into several charts below.
The U.S. has definitely begun to recover from its grinding downtrend in home prices.[The BusinessInsider.com has a post** in which it reports that, “according to the new Case-Shiller report, the index of 20 cities was up just 0.19% month-over-month and 10.82% year-over-year [but that] on a seasonally-adjusted month-over-month basis home prices were down in five metro areas: Cleveland (-0.6%), Washington (-0.4%), New York (-0.3%), San Diego (-0.3%), Atlanta (-0.03%).
Here’s the chart from TD Securities highlighting how many of the 20 cities see monthly price increases and decreases.”]
The U.K. appears to be relatively stable since the end of the global recession in 2009.Home prices aren’t accelerating aggressively upwards on an aggregate basis, mostly because the concerns of a housing bubble are rooted in one specific area, London.
France, more closely integrated to the European continent and exposed to the deflationary pressure of the eurozone, had a recovery following the recession but has now been trending downwards again for some time.
Among peripheral countries, there hasn’t been a recovery, as home prices are still seeking out a bottom after the massive reversal off all-time-highs in 2007.
Ireland is showing signs of life.
Spain and Italy haven’t put in a bottom yet.
Germany and Japan stand out on the chart as consistent losers when it comes to home price appreciation. Neither market jumped off the line in 2000 – unlike virtually every other economy – and in Japan that deflationary downward trend is constant. The differences are part cultural, part economic.
In Japan, housing is viewed much more as consumption than investment, and local zoning restrictions in markets like Tokyo are often over-shadowed by the government’s focus on constant building and re-building, creating more turnover and density in housing structures.
In Germany, the rental market is much more active and home ownership rates are lower; the German tax code also doesn’t have a deduction for mortgage interest like many other developed economies.
Finally to the good news, for current homeowners anyways.
English-speaking former U.K. colonies are by far the most aggressively expensive home price cohort.
The boom/bust cycle in home prices for Australia, New Zealand, and Canada was much shorter than it was for other economies, and now prices are grinding steadily higher again; Canada and New Zealand are the only two advanced economies at all time highs for home prices.
- The Canadian market, driven by foreign investment in cities like Vancouver and a boom in oil production throughout the central provinces, especially Alberta, is trending strongly to the upside.
- Australia had a mini-cycle downwards but is now once again moving up.
- New Zealand is the real winner among the 11 economies. Home prices there have gone up by more than 93% since 2000, the best performance of any advanced economy. It’s no surprise then that the Reserve Bank of New Zealand hiked interest rates at their last meeting.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://www.bespokeinvest.com/thinkbig/2014/6/22/global-home-price-values.html (This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Bespoke Premium subscribers get this kind of anaylsis delivered right to their inbox. Try Premium out today with a five day free trial!)
**http://www.businessinsider.com/us-home-prices-decouple-2014-6 (Copyright © 2014 Business Insider Inc. All rights reserved.
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