Why some housing bubbles remain - By Edward Chancellor
Housing bubbles appear pretty similar on the way up. Yet the aftermaths of recent real estate booms in the US, UK, Spain and Australia have been extremely varied. US home prices took a real hammering. The formerly hot housing markets of the UK and Spain, on the other hand, declined somewhat but never fully deflated, while Australian real estate prices have rebounded with remarkable vigour. Why have these housing markets, which not long ago marched in lockstep, produced such diverse outcomes?
One explanation is national differences in housing supply. Markets where land was readily available for development, most notably the US, were flooded with new construction during the boom period. Annual housing completions in the US climbed roughly 50 per cent in the five years to the market peak in 2006. The resulting oversupply of unsold properties has lasted to the current day. But in other parts of the world, including Britain and Australia, new housing supply didn’t keep up with rising home prices and there was no overhang of properties to sell off when the credit crunch struck.
Bubbles can still break, however, even when the market is not saturated with new buildings.
- Links
Larry Cunningham: Berkshire’s Distinctive Shareholders and Corporate Longevity (LINK)Related book: Berkshire Beyond BuffettBarry Ritholtz interviews Sheila Bair (LINK) Related book: Bull by the HornsThe Feynman Lectures on Physics, The...
- Corruption Threatens China’s Future – By Edward Chancellor
Widespread corruption at the local government level remains a threat to China’s economic development. If stories are to be believed, Chongqing’s disgraced party boss Bo Xilai even used an anti-corruption drive to put the squeeze on local business...
- The End Of Australia’s $2 Trillion Housing Party - By Philip Soos
Found via the Corner of Berkshire & Fairfax. Executive Summary A great deal of debate has occurred in Australia on the notion that the residential property market may be experiencing a bubble, set to burst in a similar fashion to that in the United...
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The last financial crisis isn’t over, but we might as well start getting ready for the next one. Sorry to be gloomy, but there it is. Why? Here are 10 reasons. 1. We are learning the wrong lessons from the last one. Was the housing bubble really caused...
- Australian Housing Market 'a Time Bomb'
Thanks to Dah Hui Lau for passing this along. THE Australian and British housing markets are the last two bubbles left in the wake of the financial crisis, and it is only a matter of time before they crash, warns legendary US investor and co-founder of...