Is Europe’s Housing Market Next?
Over the last three decades, house prices in the US and Europe have tended to follow three slow-moving, related boom-bust cycles. If that pattern holds, the downturn in house prices will not be limited to the US, and, on both sides of the Atlantic, the decline is likely to undermine consumer spending.
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A bubble in the American housing market – fueled in part by so-called “sub-prime” mortgages – was the catalyst for today’s financial market turbulence. But the bubble was not confined to the United States. In Europe, house prices have also increased sharply over the last decade – more dramatically than in the US in many cases. The same is true of other OECD countries and emerging markets, where rapidly increasing incomes have put pressure on asset prices.