Global housing prices are at record highs and are on the verge of collapsing. If that happens, the consequences will be dire.
It’s hardly been five years after the global economy suffered a major blow when the dot.com bubble burst. The abnormally high Internet stock prices took the benchmark indices in the US and other major markets to an all-time high and then collapsed at once like a house of cards. And now history seems to be repeating itself. But this time, it’s not stocks, it’s property that has caught the fancy of investors. Interestingly, this bubble, as expressed by many experts, is history’s biggest ever asset price bubble.
According to estimates by The Economist, during the last five years, the total value of residential property in all developed economies rose by $30 tn to touch $70 tn. And this growth, as a percentage of GDP is the highest of all the biggest bubbles that rocked the world in the past. For instance, during the 1920s, the asset price excess was 55% of the US GDP; during the tech bubble in late 1990s, it was 80% of the GDP and currently, the price excess in property prices is 100% of the GDP. |
