CNBC mentions Israel as one of the markets where housing bubbles may be building, following the rebound from the crash which followed the credit crisis of 2008. "House prices have risen by close to 40% in Israel since 2009," it says.
Canada, Norway, Belgium, Australia, Dubai, Hong Kong, London, and Singapore are other markets causing concern among economists and property market analysts. Home prices have risen almost 30% in Norway since 2009, and by over 20% in Switzerland.
"These house price booms are being fueled by the relative ease with which residents can borrow more money to fund house-buying. After central banks including the Federal Reserve and the European Central Bank (ECB) propped up the financial markets with an influx of cheap money, these banks had more credit available for consumers. And those loans are cheaper as a result of historically low interest rates in many countries," says CNBC. "When interest rates are so low, there's always a risk of too much money being allocated to assets you can borrow against," Knight Frank partner Liam Bailey told CNBC.
According to Goldman Sachs, the faster real house price appreciation (the rise in house price valuations) has been, the more likely they are to see a slump in the next five years, and that Israel, Germany, and Switzerland are most likely to see a significant drop in prices.
"Israel's house price boom has been prompted by increased international investment, but also the historical lack of supply. With construction in the state always a political hot potato owing to disputes with Palestine, the supply issue is unlikely to be resolved soon," says CNBC.
Published by Globes [online], Israel business news - www.globes-online.com - on October 28, 2013
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