Central Bankers Asking For Trouble By Calling Bubble
Central bankers cannot, as a matter of self preservation, mention much about bubbles because that would almost certainly be an admission of ineffectuality ?
They are not mincing their words these days.
- IMF Warns Norway Of Housing Bubble : FT 6 Sep 13 with prices overvalued by more than 40%
- Fed’s Fischer Warns Of Potential U.S. Housing Bubble : Reuters 17 Oct 13 although he would not support tapering QE at the FOMC this month
- Germany’s Central Bank Warns Of Local Housing Bubbles : WSJ 21 Oct 13 and over valuations of up to 20%
Meanwhile Denmark is in the midst of a housing crisis and London is seeing prices rise 10% in 1 month on foreign demand but the BOE is stopping short of calling it a bubble because they are not responsible for foreigners ? UK mortgage approvals hit a 5 year high last month. http://www.ft.com/intl/fastft
Even as Detroit files for Chapter 9, home prices there soar to a 5 year high. http://www.zerohedge.com/news/2013-09-24/unstoppabull-housing-recovery-despite-bankruptcy-detroit-home-prices-soar-five-year-
Better still, half the US homes purchased in 2012 were paid in cash. http://blogs.wsj.com/developments/2013/08/15/report-half-of-all-homes-are-being-purchased-with-cash/
China makes London look bad with prices in Beijing rising 18% in 1 month, followed by 14% in Shenzhen and 12% in Shanghai. http://www.businessweek.com/news/2013-10-21/china-home-prices-rise-led-by-record-gains-in-four-major-cities
It does not matter that shops and apartments lie empty from Netherlands to Singapore. http://www.ft.com/intl/cms/s/0/b0bc12ce-05b3-11e3-8ed5-00144feab7de.html?ftcamp=published_links%2Frss%2Fcompanies_financials%2Ffeed%2F%2Fproduct&siteedition=intl#axzz2iJtJvAFg
In Singapore we had 3 applicants for each new unit at this Skypark condominium signaling market strength.
I was inspired by this How To Spot A Housing Bubble Before It Bursts piece out of Business Spectator (PLEASE DO NOT READ THIS IF YOU HAD JUST BOUGHT A PROPERTY IN LONDON), to come out with a simple indicator for Singapore. For all this while, I always used GDP per capita and short term interest rates to work out housing affordability and trend. He suggests using house prices adjusted for inflation.
So I plotted the URA property index against CPI just for kicks and this is what I got.
Since the 90’s the peaks more or less match except this time. Perhaps its the foreign buyer effect ?
Perhaps its just to prove the central bankers are not doing their jobs ?