May 30, 2006

Falling like dominos: Home price crash risk in Ireland, Denmark, New Zealand, Sweden, France, Spain and of course, USA

Ah, those pesky rising interest rates. Someone called the cops on the house price party.

High risk of Irish house-price crash

Ireland is one of a small group of countries that risk experiencing a sharp house-price reversal, according to a leading international think tank.The Organisation for Economic Cooperation and Development (OECD) said there was a 50:50 chance that the housing market would suddenly slow.

The organisation’s economists said that, in its study of 17 countries, Ireland was among those where there was a significant risk that house prices would fall sharply or collapse.Among the other countries most at risk are Denmark and New Zealand, where the probability of a major reversal was put at 100 per cent and 87 per cent respectively.

Sweden, France, Spain and the US are also in the high-risk category, with the chance of house price reversal being more than 50 per cent.

Ireland will join the high-risk countries if house prices continue to rise this year and interest rates increase by about 1 per cent, said senior OECD economist Paul van den Noord.‘‘It is giving a warning signal to policymakers and government,” van den Noord said.‘‘We call it peaking - it means that prices will fall in real terms after accounting for inflation.

‘‘We do not make a distinction between a soft landing or a hard landing. House prices do not bode well, but it would need another interest rate increase to tilt Ireland over into a high-risk country.”


Anonymous said...

Does anybody have real data indicating a housing bubble in the Paris market? I own one property there and am trying to judge the market, which seems grossly overvalued to me but I also know the French have much less of the speculative lending than we have in the US. Also, Paris is fairly unique. If anyplace can say "this place is different," Paris can. There is very little economic activity in France outside the capital, with the exception of a couple of industries focussed in very small areas.

foreclose_me said...

It would appear the barbarians are at the gates of Paris. Which, depending on your time horizon and the ultimate outcome, is either great or horrible.

Anonymous said...

"It would appear the barbarians are at the gates of Paris."

Are you referring to the mortgage industry folks with zero down, interest only, option ARM, just make a fog on this mirror to qualify buffoonery or the usual seasonal crowd of American tourists and college kids?

Anonymous said...

Inspite of the warning of the OECD and others, not to mention the fact that it's almost certain that interest rates will rise by 3/4 before the end of the year, house prices here in Ireland accelerated at a rate not seen since the boom of 2000!

Mentioning the B words (bubble and burst) is now even more unacceptable in certain polite company. Some people just don't want to face the obvious.

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