Housing bubble was worldwide
NEVER before have real house prices risen so fast, for so long, in so many
countries. Property markets have been frothing from America, Britain and
Australia to France, Spain and China. Rising property prices helped to
prop up the world economy after the stockmarket bubble burst in 2000.
What if the housing boom now turns to bust?
...
America's housing market heated up later than those in other countries,
such as Britain and Australia, but it is now looking more and more similar.
Even the Federal Reserve is at last starting to fret about what is happening.
Prices are being driven by speculative demand. A study by the National
Association of Realtors (NAR) found that 23% of all American houses
bought in 2004 were for investment, not owner-occupation. Another
13% were bought as second homes. Investors are prepared to buy houses
they will rent out at a loss, just because they think prices will keep rising
—the very definition of a financial bubble. “Flippers” buy and sell new
properties even before they are built in the hope of a large gain. In Miami,
as many as half of the original buyers resell new apartments in this way.
Many properties change hands two or three times before somebody
finally moves in.
The global housing boom: In come the waves
Economist, 2005 June 16th
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