Housing bust

House prices in many OECD countries rose for more than a decade from the mid- 1990s–an unusually long and steep climb. Previously, booms typically lasted for about six years and house prices rose by about 45%; by contrast, the recent boom went on for twice as long and prices increased by an average of 120%.

The recession ended all that, causing house prices to decline in many countries. In the US, prices had already begun to fall before the recession and much earlier than in other OECD countries, led by the sub-prime crisis: compare the first quarter of 2006 with 2008. Indeed, that US fall, which undermined the value of products like mortgage-backed securities, helped trigger the financial crisis.

 Overall, US housing prices fell by about 30% up to mid-2009. They appear to have recovered somewhat since then, although, as The New York Times reports, it will be some time before it becomes clear if they’ve stabilised. Several other OECD countries also saw big falls, including Spain and the UK, which has since had a sharp rebound. Exceptions? Prices in Australia quickly recovered from a recessionary dip, while Germany’s property market largely avoided both the boom and the bust.

A word of caution: international comparisons of house prices are hard to compile. There may be big variations among countries in how data is collected, and the data may focus on city prices, or cover only certain types of houses.

See www.oecd.org/eco

Economic data

GDP growth: +0.6% Q4 2017 year-on-year
Consumer price inflation: 2.2% Jan 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.5% Jan 2018
Last update: 12 Mar 2018


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