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. Life

    In Montreal, French Expats Find Language Doesn't Translate to Community

    More Parisians are moving to Quebec seeking lower rents, jobs, and an easy cultural fit. But as housing prices rise, so does resentment among the city’s locals.

  2. Equity

    Amazon Should Just Build HQ2 In My Apartment

    Since no city submitted the perfect bid for the company’s second world headquarters, I put together my own.

  3. POV

    One of the Greatest Threats to Our Lifespans Is Loneliness

    What would society be like if health insurers and public bodies invested as much in encouraging social encounters as exercise and good diet?

  4. Transportation

    How Seattle Bucked a National Trend and Got More People to Ride the Bus

    Three experts in three very different positions weigh in on their city’s ridership success.

  5. Transportation

    If You Drive Less Than 10,000 Miles a Year, You Probably Shouldn't Own a Car

    Up to one-quarter of all U.S. drivers might be better off using ride-sharing services instead.