The global housing market in 2021
Bloomberg Economics published a report on housing markets around the world. They use indicators such as price-to-rent and price-to-income ratios in order to assess the sustainability of price gains. In addition, they use house price growth to measure current momentum. Their findings include:
- New Zealand, Canada and Sweden rank as the world’s frothiest housing markets, with the U.K. and the U.S. also near the top of the risk rankings;
- For many OECD countries the price ratios are higher than they were ahead of the 2008 financial crisis;
- There is concern that risks might be increasing especially since this is a synchronized boom in house prices.
World’s Bubbliest Housing Markets Flash 2008 Style Warnings
By: Bloomberg
The COVID impact on housing
Gupta et al. look at rent costs and house price data from 30 metropolitan areas in the U.S and find that the COVID-19 pandemic brought house price and rent declines in city centers, and price and rent increases away from the center, thereby flattening the bid-rent curve in most U.S. metropolitan areas. They attribute this change to the increased number of workers who were able to work from home during the lockdowns. But will this trend become permanent? The authors argue that by comparing the changes in house prices—which are forward looking—to the changes in rents in city centers and in the suburbs, they can glance an early answer to this difficult question.
Combining a present-value model with professional forecasters’ opinion on the permanency of working from home, we find that housing markets paint an optimistic picture of urban revival, indicating higher rent growth in urban versus suburban areas for the foreseeable future.
Flattening the Curve: Pandemic-Induced Revaluation of Urban Real Estate
Authors: Arpit Gupta, Vrinda Mittal, Jonas Peeters, Stijn Van Nieuwerburgh
From: New York University, Columbia University
