? How Toxic Is Your Mortgage? |
| A Mixed Message On Foreclosures ?
September 07, 2006
The Brits, the Aussies, and the Price of Your House
Housing prices zoomed in Britain and Australia before the big boom in the U.S., and they began to soften earlier. So Americans might be able to get a glimpse into their own future by looking at what has happened in Britain and Australia over the last year or so.
(Pictured: Government House in Canberra, the capital of Australia.)
In a new report, American Express Bank Ltd. in London sees both positive and negative hints from the experience of what used to be known as the Commonwealth.
On the positive side, prices rose even more in the U.K. and Australia than in the U.S., and they haven't fallen since the boom ended. For example, says American Express, U.S. house prices rose 97% in the decade through the third quarter of 2005, but prices in the U.K. rose 167% through the third quarter of 2004. Also heartening: after a brief lull, prices in the U.K. and Australia have continued upward, albeit at a much slower pace.
On the negative side, the U.S. is already showing more weakness than the U.K. and Australia in the critical category of home construction. In Australia, American Express says, housing starts fell 10% to 15% from their peak. In the U.K., where tight zoning laws prevented a construction boom during the overheated years, construction merely leveled off. In the U.S., in contrast, "permits are down 20% and it looks like homebuilders will cut back further."
TrackBack URL for this entry:
Actually, my London flat dropped in value by about 10% two years after the boom; the real drop would be more like 15%. However drops in property prices are far more opaque than rises because 1) owners tend not to sell so their is less data; 2) agents will always talk-up the market; the gap between asking price and transaction price widens.
Posted by: Patrick at September 11, 2006 05:31 AM