Average property prices in Canada have more than doubled since the start of the century. (Photo: Wikimedia Commons)
Residential and commercial property prices in some developed economies have spiralled so high that there is a significant chance these markets could overheat and later suffer large corrections, according to the Organisation for Economic Cooperation and Development (OECD) and reported Business Insider.
Among them is Canada, where average property prices have more than doubled since the start of the century, said OECD’s Chief Economist Catherine Mann. Over in Sweden, residential prices rose by 18 percent year-on-year in Q3 2016.
Mann also expressed her pessimism over the UK property market, but a large price drop there may benefit local home buyers.
“We’ve already started to see some changes in real-estate prices in the UK, (particularly in) the London market,” she said.
“(What’s) interesting in terms of the implications for the UK economy is who bears the burden — who bears the adjustment cost,” she said in an interview with The Telegraph. “If it’s a non-resident, then lower house prices could actually be good for the UK.”
According to the OECD, which represents developed nations, prices in the aforementioned countries are “very high” and “not consistent with a stable real estate market”.
It is also not the first group to caution against a likely downturn in London’s real estate sector.
A report from estate agent Haart last August revealed that the Brexit vote may have led to a drop of more than £30,000 (S$53,195) in average home prices in the UK capital.
In a Times survey last month, 22 of 39 leading economists forecasted that residential prices in London could become flat or fall next year.
Meanwhile, Lombard Street Research’s Chairman Charles Dumas and DeAnne Julius, a former member of the Bank of England’s monetary-policy committee, predicted that home prices there could drop by up to 10 percent.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
