Global Real Estate Bubble Index
Wednesday Apr 21st, 2021
"The specter of a global recession has haunted housing markets for years. Yet in the midst of the current pandemic-triggered shock, this fear has so far turned out to be unfounded. Despite the sharpest global economic downturn in more than 60 years, house prices have actually accelerated in the last four quarters.
Several puzzle pieces had to fall into place for house prices to avoid plummeting in such an environment. Governments have compensated many potential home buyers for their income losses. Financing conditions have been relaxed, and taxes and foreclosures suspended in many countries. And low interest rates that seem set in stone for years to come have kept investment demand high.
At the same time, rental markets have already taken a hit, reflecting weaker enduser housing demand. When government support runs out, house prices may be left out in the cold. Moreover, the coronavirus pandemic has called into question the growth prospects for housing in urban centers. This year’s experiment with widespread home office adoption has shown that many employees can potentially quit their barely affordable city apartments without losing access to the local job market.
Even so, the big urban centers will remain economic hubs and should continue to attract people. But sky-high housing market valuations, coupled with noticeably weaker demand prospects, suggest investors should be cautious. Though real estate is often regarded as a legacy investment, now is certainly not the worst time for owners of multiple properties to consider profit taking."