US and European Housing Prices Soar... Global Housing Bubble 'Warning Signs'

US Home Prices Surge 23.6% in One Year... Netherlands Sees Highest Increase in 20 Years

[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] It has been confirmed that U.S. housing prices in May rose by as much as 23.6% compared to a year ago. Housing prices in the Netherlands also surged by 12.9%, and several countries in Europe are recording double-digit increases in housing prices. As concerns about a housing market bubble grow, debates over the low-interest monetary policies of the U.S. and European central banks are intensifying.

According to major foreign media on the 22nd (local time), the National Association of Realtors (NAR) announced that the median price of existing homes in the U.S. in May was $350,300 (approximately 397.24 million KRW), up 23.6% from the same month last year. Housing prices hit an all-time high, and the year-on-year growth rate was the highest since NAR began compiling related statistics in 1999.

The Dutch Statistics Office also announced that the May existing home sales price rose 12.9% compared to the same month last year. The 12.9% increase is the highest growth rate in 20 years since 2001. Earlier, the UK’s May housing prices were confirmed to have surged 10.9% year-on-year.

As prices soar, the number of housing transactions is decreasing. In May, the number of existing home sales in the U.S. was recorded at 5.8 million annualized, down 0.9% from April. This marked the fourth consecutive month of decline. In the Netherlands, May housing sales totaled 16,126 units, down 12.1% year-on-year.

With the decline in housing transactions, some are predicting that housing prices may have reached their peak. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, "Sales are decreasing and inventory is increasing," adding, "The soaring housing prices will soon fall."

However, since the U.S. Federal Reserve (Fed) and the European Central Bank (ECB) intend to maintain low interest rates and continue large-scale quantitative easing policies, there are also forecasts that the upward trend in housing prices will continue. Adam Slater, an economist at Oxford Economics, said, "Due to loose monetary policy, asset prices could rise much further." Slater expressed concerns that if prices rise further due to monetary policy, it could eventually lead to a sharp price drop.

The world’s largest private equity firm, Blackstone, also appears to anticipate further increases in housing prices. Blackstone announced that it has agreed to acquire Home Partners of America (HPA), a U.S. home sales and rental company, for $6 billion. HPA owns more than 17,000 homes across the United States.

Fed Chair Jerome Powell emphasized his stance to continue stimulus measures during his appearance before the House of Representatives on the 22nd, despite debates over asset price bubbles.

The ECB released its Eurozone housing price trend report for the fourth quarter of last year earlier this week. The housing price growth rate in the Eurozone for Q4 last year was 5.8%, the highest since 2007. Despite concerns about a housing price bubble, the ECB also has no plans to reduce the scale of quantitative easing.

The soaring housing prices were also a topic of discussion at the European Parliament on the 21st, where ECB President Christine Lagarde appeared. MEP Michiel Hoogeveen criticized, "As the housing market overheats, young people and the middle class are forced to buy homes at high prices," adding, "This is due to the ECB’s lenient monetary policy."

President Lagarde rebutted, saying, "There is no clear evidence that debt is causing a housing market bubble in the Eurozone." However, she added, "Some countries and city housing markets are exposed to risks."