MANAMA: The most-risky real estate markets remain Australia, London, Hong Kong, Sweden and Norway. All of these markets share these two features: home prices are decoupled from local incomes, and the real economy is experiencing distortions linked to monetary policy, such as a surge in lending and / or a boom in the construction sector.
Saxo Bank, the online multi-asset trading and investment specialist, has published its quarterly outlook for global markets and key trading ideas for Q1 2018 with focus turning to bubbles: how they form and how to spot them.
“Despite the global financial crisis, real estate prices kept increasing in these five areas. Based on BIS data, since 2007, the boom ranged from 45% in London and its suburbs to more than 200% in Hong Kong. In the long term, however, the riskiest market is Norway,” Christopher Dembik, Head of Macro Analysis, said.
“The lack of inflation combined with high indebtedness and a high home ownership rate in such a highly leveraged economy means that the housing correction will have ripple effects on the economy and will halt credit and growth.”
“Among major economies, investor worries have mostly focused on China where property prices have inflated massively due to excess liquidity. The bright side is that the government’s first measures to better regulate the real estate market seem to be paying off as for the first time since 2015, new home sales contracted. It is too early to draw conclusions, though, and will strongly depend on the economic targets unveiled by the Chinese government at the annual parliamentary meeting in March 2018.”