Global Housing Markets Downward Trend

As shown in my previous article, it is now a commonly recognized phenomenon of global housing price synchronization [1]. The Economists, for example, reported that in the past 5 years, 20 out of 22 cities in the world had their housing prices up as shown in the graph (Figure 1) below.

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Fig 1 % change on the 5 years of Housing Price Index of 22 cities. Source: The Economists [2]

However, since Oct 2017 the Fed of the US has started the reduction of the Balance Sheet (QE Unwind), It has already reduced US$285 billion of Fed’s Assets up to Oct 3, 2018. (Figure 2) And the unwind will continue and accelerate. In other words, the liquidity is retreating after the 3 QEs.

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Fig 2 Federal Reserve Total Assets. Source: Wolfstreet.com [3]

Due to the influx of liquidity after 2008, many cities’ housing markets are bubblized. According the UBS Global Real Estate Bubble Index, there are at least 6 cities that have real estate bubbles, viz. (1) Hong Kong, (2) Munich, (3) Toronto, (4) Vancouver, (5) Amsterdam, (6) London. (Figure 3)

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Fig 3 Global Real Estate Bubble Index. Source: UBS [4]

After 10 years of bubbling, the trend seems to be reversing in the wake of the QE unwind and the normalization of interest rate triggered in the US. Many cities are now crossing the apex and start to go down. This article is going to show the 3 housing price trends of the bubbled cities.

Figures 4 and 5 show the housing price indexes of Toronto and London, the yoy housing price change of both cities have already dip into negative zone after a long period of upsurge. While the yoy change of Hong Kong Housing Price is still positive, though the index seems to turn downwards (Figure 6).

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Fig 4 Housing Price Index (right axis) and yoy change (shaped area & left axis) of Toronto 2013–2018. Source: Teranet (2018) [5]
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Fig 5 Housing Price Index (right axis) and yoy change (shaped area & left axis) of London, 2013–2018. Source: HM Land Registry (2018) [6]
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Fig 6 Housing Price Index (right axis) and yoy change (shaped area & left axis) of Hong Kong, 2013–2018. Source: Rating and Valuation Dept (2018) [7]

In fact, the term “contagion” has been commonly used to explain the extensive impacts geographically during the Asian Financial Crisis in 1997. It is now more and more contagious in financial crisis and housing price change. Please refer to my previous article for the reasons of the contagious co-movements of global housing price [1].

(Full article in Chinese was published in HKEJ Monthly Dec 2018 [8])

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[1] Yiu, C.Y. (2018) Global Housing Prices Synchronization, Medium Dec. 3. https://medium.com/@edwardyiu/global-housing-prices-synchronization-d48811bf7bba

[2] The Economist (2018) Our cities house-price index suggests the property market is slowing, Aug. 11. https://www.economist.com/finance-and-economics/2018/08/11/our-cities-house-price-index-suggests-the-property-market-is-slowing

[3] Richter, W. (2018) The Fed’s QE Unwind Reaches $285 Billion, Oct, 4, Wolfstreet.com. https://wolfstreet.com/2018/10/04/feds-balance-sheet-normalization-reaches-285-billion/

[4] Hong Kong Business (2018) Hong Kong faces world’s greatest housing bubble risk: UBS, Sep 28. https://hongkongbusiness.hk/residential-property/news/hong-kong-faces-worlds-greatest-housing-bubble-risk-ubs

[5] Teranet (2018) National Bank House Price Index, Canadian. https://housepriceindex.ca/#maps=c11

[6] HM Land Registry (2018) UK House Price Index: data downloads August 2018。https://www.gov.uk/government/statistical-data-sets/uk-house-price-index-data-downloads-august-2018#download-the-data

[7] Rating and Valuation Department (2018) Housing Price Index. Hong Kong SAR Government. https://www.rvd.gov.hk/en/property_market_statistics/index.html

[8] Yiu, C.Y. (2018) Global Housing Price Downward Trend (息魔殺到,全球樓價見頂回落),Hong Kong Economic Journal Monthly 501, Dec. 90–92.

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ecyY is the Founder of Real Estate Development and Building Research & Information Centre REDBRIC

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