A Housing Bubble In Europe?
That seems to be the grand question at the moment looking at the European housing market. Before I turn to my main impetus for this small pointer I will begin with a referral to a recent article in The Economist which takes a quick view at the global housing market ... a good read to set the scene; the US housing market is turning and Europe's is still looking perky but for how long?
'America's housing market has certainly caught a chill. According to the Office of Federal Housing Enterprise Oversight ( OFHEO ), the average price of a house rose by only 1.2% in the second quarter, the smallest gain since 1999. The past year has seen the sharpest slowdown in the rate of growth since the series started in 1975. Even so, average prices are still up by 10.1% on a year ago. This is much stronger than the series published by the National Association of Realtors ( NAR ), which showed a rise of only 0.9% in the year to July.
Elsewhere, our global house-price indicators signal a cheerier story. House-price inflation is faster than a year ago in roughly half of the 20 countries we track (see table). Apart from America, only Spain, Hong Kong and South Africa have seen big slowdowns. In ten of the countries, prices are rising at double-digit rates, compared with only seven countries last year. European housing markets—notably Denmark, Belgium, Ireland, France and Sweden—now dominate the top of the league. Anecdotal evidence suggests that even the German market is starting to wake up after more than a decade of flat or falling prices, but this has yet to show up the index that we use, which is published with a long lag (there are no figures for 2006).'
Now all this is widely covered in a recent post by Brad Setser (and as it is Charles Gottlieb) in which he uses the frothy housing market to argue (once again) that Europe is set and ready to take over from the US in driving global demand forwards. He and I do not agree here but all the same his post is good read; the graphs are interesting as well.
The bottom line provided by Charles Gottlieb ...
'Overall housing prices have arguably strongly revived the European consumer’s wealth perception, and strengthened their confidence. Internal demand revamped European growth which was revised upwards by the bureaucracy in Brussels: Euro Area growth is to be the best since 2000, achieving 2.5% yoy.
The bottom line: Europe has taken the housing relay baton from the US, but in this race, the baton is perhaps better described as a bubble.'
I know that Morgan Stanley also believes in this idea of Europe taking over from the US (Hat tip New Economist) but I am just not convinced and an upbeat housing market does not help to turn me around (see my post linked above as to why and here). However, I am watching Brad I really am so keep all those ('good') news coming and you might end up convincing me.