House prices

Caught in the downward current

The global housing market goes from bad to worse

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Readers' comments



Australia is different. The biggest industry in Aus is housing (53% of total national debt = $982B) followed by actual business debt (39% of total national debt = $782B). Prices would fall in Aus also, except for government interference. Systematic tax advantage still favours investors to the tune of $100,000 multiples over the life of a mortgage and recently the First Home Buyers Boost (some call it FHB Bribe) has been tripled to $21,000. This had the effect of actually inflating RE prices in 2009. So, if you want to make money in Real Estate, come to Bilbyland (aka Australia), where property investors are protected in a similar manner to the bilby.


I can't speak for the UK, Fabio C, but one could certainly replace "dutch" with "US" and retain the validity of the statement. Let's face it, politicians keep their jobs by pandering to the howling mobs, and the howling mobs want their homes [the only significant asset most (including me) ever hope to own] to be ever more valuable.

Of course the real beneficiaries in this are politically powerful realtors and home builders (who, incidentally, add not a single sou to the productive capacity of their nations).

Here in the US we are also working feverishly to put enough rules on the financial industry to placate the masses and let the baccarat games resume.

Fabio C

nhz, we have in the UK exactly the same situation as in the Netherlands. All you have to do is to change the words "Dutch" for "British":

"For the current Dutch government (strongly related to the building / landowner mob) keeping houseprices elevated seems to be a national security subject. They will fight the housing downturn every way they can, and crash the Dutch economy in the process. Most Dutchies still believe 'it's different here' and after a correction of maybe a few % homeprices will start surging again".

Why do you think GB is putting so much money in broken banks? So they can keep up with the lending and keep prices and tax collection inflated.

The future will tell us all what will happen.

To Liam Palmer,
Housing prices are not the biggest bubble in history, as measured by the ratio of peak market price to either replacement cost or subsequent market price.
Worse bubbles include the tulip craze in Holland, where investors planted more and more tulips, until finally some prized tulips bulbs were selling for more than their weight in gold, and the next year the starving people were eating tulip bulbs like onions.
Another notable investment craze was the trade in "relics"; particularly splinters of wood purported to be remnants of the Cross.
The largest bubble of all time in terms of money lost probably is the investments in USA stocks and bonds and bank notes during the last ten years, if you calculate the prices in terms of real value rather than nominal value.
Houses prices may be heading for the ground, but in few places have prices dropped more than 90 percent.
Furthermore, “Never a borrower or a lender be”, and those who paid cash for their house at least have a place to live : )


I want to point out that is almost always misleading to look at the US as a single region in comparison to other, smaller countries.

There are vast middle regions of the country that did not experience the price inflation in any real way and are now only suffering from slight price deflation or flattening in response to the constant media noise regarding the "collapse" of the housing market.

Many of these areas have a median home price right around $100,000 and an affordability index in the high 90% range. Their values are very unlikely to drop the 30-40% that is often quoted.


Interesting stats, especially since the latest figures from the Netherlands show only a -0.5% decline for February 2009 (CBS). The Economist may want to change the numbers.

Also, NHZ, The Netherlands does not have one of the biggest bubbles in the world. I am not sure where you get your numbers from. If it is the IMF, they already indicated they made a huge booboo in their research from last year, and the bubble in the Netherlands was actually nonexistent compared to lets say, the UK, US, Ireland, Spain and others. (IMF)
You should get your numbers right on other issues too. The mortgage debt in the Netherlands is about half of what you quote (European Mortgage Federation). Also, the figures about home sales seem wildly out of whack with figures from official websites (NVM, CBS etc). There the numbers vary from -12% to -27% yoy. And the increase of 1000% I have seen nowhere for housprice increases. Divide it by 10 and you would be closer to the mark. Please go back and check your numbers.

Could you provide even the faintest evidence that the current government is related to any building company, let alone a building mob?


strange that the article lists a 5% decline for Netherlands, while according to the latest stats (feb. 2009) Dutch home prices have just started to decline, at -0.5% on a yoy basis. Does NVM provide different stats to foreigners?

The Netherlands has one of the biggest housingbubbles worldwide, and the highest mortgage debt relative to GDP (over 200%). Homeprices in many cities increased some 1000% from the early nineties (the NVM stats severely underestimate the price runup because of all kinds of statistical flaws). Dutch home sales are down strongly (-50% for existing homes, and -70% for new homes) suggesting the current prices are not realistic -just like what Jose mentions above for Spain.


While prices and lending conditions in US and UK are on their way to sane levels again, a median home in Netherlands still costs 8.5x median income, and a majority of mortgages are I/O loans at an average 114% of the home value; 8-10x income loans can still be found here as well. This will end badly :(

Jose Carpintero

I feel the numbers in your chart don't reflect the reality in Spain (and in other markets as well).
The problem is that the chart does not reflect the collapse in volumes, just the small price decrease. What is happening is that people refuse to sell at, say, 30% discount on what they thought their house was worth, and buyers refuse to buy until they see that reality in prices. The result: Buying and selling has stopped.
In the (high-inflation) past, this disparity would be erased by time. After two-three years of "not-lowering-the-asking-price" the real price would have automatically have dropped 20%-30%, and the market would re-start.

With current inflation around 1%ish, that automatic catch-up could take... 20 years.


This article was a reflection of how extreme this recession has gotten. House prices are insane. They are out of control. But what makes this worse is that this is a global problem. Sixteen countries have experienced year-on-year declines, which has gone up from six countries three months earlier. That means that ten countries had a drastic change in housing prices, in the limitation of just three months. The housing market, globally, is taking a dramatic turn for the worst. And no one knows what to do, to stop it, or at least control it. People are scared, because of the change in the housing markets. As quoted in the article: “Long was the uphill march, long will be the downhill descent.” Meaning that this is going to be a long battle to get back to where we were, because the housing changes have been so radical. The article even stated that this is not the end, because British house prices could fall even more. The housing market is yo-yoing, at first it dramatically increased, but now is the worst time to sell your home, because of the dramatic decrease. So people all around the world are feeling stuck, because they can’t do anything to change their circumstances.


This article presents some startling information. As of recently, decreasing housing prices have jumped from affecting three countries globally to SIXTEEN.
In March, we saw spikes in housebilding, which was a welcome event after months of decline. However, there is a good chance these homes will simply end up unsold and useless.
For a long while, Americans rode on the so-called housing boom. The article reminds us of the optimisim felt, the trust that the bubble would never burst. Unfortunately, we were very far off.
Now, there is panic, and no end in sight. The article quotes a recent report by Numis Securities estimating that British house prices could still fall by a 40-55%. This devestating plummet will leave citizens with homes worth less than their morgage debts!
In addition, the poster below me makes some very intesting points. The statistics are simply shocking. It is amazing that the housing bubble peaked at $205,000 three years ago-- in comparison to an ajusted price of 100,000 in 1890! The bubble has fallen a good amount since then, 135,000 as of now, but he warns that we aren't out of the woods, and this seems valid. We still haven't even fallen past the all time highs, even with the 34% drop. The poster's estimation of a 25% real estate decline still to come is scary, but realistic.


The UK went broke trying to support an inflated property bubble, 190% increase in prices in less than a decade, yet the whole country seem to be in denial of this fact. I have been shocked the past few days to keep reading in relation to Lord Turners proposed regulation, that the mortgage market does not need regulating the UK went broke because of the US subprime!US property prices increased 75% I believe not 190% , with everyone saying that anything over 4x's income was / is irresponsible , then what does the UK want to the government to do if not regulate. The UK started lending 125% LTV and 7x's income because unregulated prices led to prices losing all relation to wages and lending power. The UK borrowed 6 billion from overseas to prop up the mortgage market and 750 billion by 2007! Yesterday Lord Turner sent out a warning to lenders who are mostly lending sensibly now that if they stop lending sensibly he will impose regulation at 3x's income to ensure prices do not end up breaking the banks again. The Lord Turner speak so regulating at 3x's income to stop prices inflating seems to suggest he is expecting 40 - 50% falls before prices might start rising, rising this time though in line with incomes. This is SUCH GOOD news for FTB's who only have to wait untl the end of the year for property prices to start becoming affordabe at 3x's income as most lenders are already lending at this level. Regulaton DOES NOT stop FTB's from buying, OF COURSE PRICES COME DOWN in line with incomes. Income should have always predicted potential property values and would have continued to do so the past decade if not for irresponsible lending

Liam Palmer

Housing has been the greatest bubble in world history (in nominal cash terms) it's only reasonable to expect a huge crash. Interesting to watch the bottoming process (maybe) start in parts of the US, such as California, who are more than 50% down in real terms. Predicting bottoms is a fruitless task, so I like to look at historical worst cases...which in the UK case appears to be 40-50% from here...


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