New data from the IMF suggests that many countries may be on their way to their own housing crises

America has suffered through a housing crisis for the past several years, with the average price falling 30 percent, and much more than that in some areas. So it may come as a surprise to many Americans that much of the world still appears to be in the throes of its own housing bubble. The chart below, from the Global Housing Monitor produced by the International Monetary Fund's Prakash Loungani, offers some perspective.

Housing prices have been falling in about half of the countries, but they're rising on the other half.

The next chart shows housing prices to be exceeding two of their key "anchors" - the housing price to income ratio and the housing price to rent ration - in many of these countries. While housing price to income ratios are below the average levels in America, they are well above in the Netherlands, Belgium, France, Australia, Canada, Spain, the U.K., Norway, Denmark and Sweden. This is even the case for crisis-prone countries like Italy and Greece.

Canada tops the list on the housing price to rent ratio. Housing prices are significantly overvalued on this score (being driven perhaps by the high global demand for housing in Vancouver and to a lesser extent Toronto). The housing price to rent ratio also significantly exceeds its historical norm in Norway, New Zealand, Belgium, Australia, France, Finland, Spain, the U.K., the Netherlands, Denmark, Sweden, Ireland and several other countries.

Lougani notes that these indicators are a "very broad brush" and that there are "myriad country-specific factors that influence house prices." Still he cautions when these two key ratios are "above their historical averages, economic theory suggests that declines in house prices may still be in the offing." 

We know how painful the housing crisis has been in the U.S. With the evolving Euro crisis and continuing global economic instability, it's scary to note that a significant global housing crisis may be in our future.

About the Author

Most Popular

  1. photo: a For Rent sign in a window in San Francisco.
    Coronavirus

    Do Landlords Deserve a Coronavirus Bailout, Too?

    Some renters and homeowners are getting financial assistance during the economic disruption from the coronavirus pandemic. What about landlords?

  2. Coronavirus

    Why Asian Countries Have Succeeded in Flattening the Curve

    To help flatten the curve in the Covid-19 outbreak, officials at all levels of government are asking people to stay home. Here's what’s worked, and what hasn't.

  3. Coronavirus

    Black Businesses Left Behind in Covid-19 Relief

    The latest U.S. coronavirus aid package promises a partial and uneven economic recovery that leaves behind the African American community.

  4. Equity

    We'll Need To Reopen Our Cities. But Not Without Making Changes First.

    We must prepare for a protracted battle with coronavirus. But there are changes we can make now to prepare locked-down cities for what’s next.

  5. An African healthcare worker takes her time washing her hands due to a virus outbreak/.
    Coronavirus

    Why You Should Stop Joking That Black People Are Immune to Coronavirus

    There’s a fatal history behind the claim that African Americans are more resistant to diseases like Covid-19 or yellow fever.

×