Mapped: The Countries with the Highest Housing Bubble Risks

Published July 2019

Here is an infographic to take note of if you own property in New Zealand, Australia, or Canada…

With a decade-long bull market and an ultra-low interest rate environment globally, it’s not surprising to see capital flock to housing assets.

In recent years, experts have been closely watching several indicators that point to rising bubble risks in some housing markets. Further, they are also warning that countries like Canada and New Zealand may be overdue for a correction in housing prices.

Key Housing Market Indicators

Bloomberg published results from a new study by economist Niraj Shah as he aimed to build a housing bubble dashboard.

It tracks four key metrics:

  1. House Price-Rent Ratio
    The ratio of house prices to the annualized cost of rent
  2. House Price-Income Ratio
    The ratio of house prices to household income
  3. Real House Prices
    Housing prices adjusted for inflation
  4. Credit to Households (% of GDP)
    Amount of debt held by households, compared to total economic output

Ranking high on just one of these metrics is a warning sign for a country’s housing market, while ranking high on multiple measures signals even greater fragility.

New Zealand globally leads in the highest of 2/4 key metrics, and in the top 5 of a third metric – 3 out 4 Warning metrics. According to this compilation of facts and statistics, New Zealand, Australia, and Canada, are lead candidates for a housing bubble, New Zealand the most fragile of them all.

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