Around the world, property markets are going bananas.
From the U.S. to the U.K. to China, housing is riding an extended boom. Global valuations are soaring at the fastest pace since 2006, according to Knight Frank, with annual price increases in double digits. Frothy markets are flashing the kind of bubble warnings that haven’t been seen since the run up to the financial crisis, a Bloomberg Economics analysis shows.
On the ground, outrageous stories are rife, with desperate buyers promising to name their first-born after sellers and derelict buildings selling for mansion prices.
The drivers for the frenzy are remarkably consistent: cheap mortgages, a post-pandemic desire for more space, newly remote workers taking city cash to regional locations—and, crucially, a pervasive fear that if you don’t buy now you may never be able to.
As prices mount, so do the risks for both individuals and society. Even without an outright crash, big mortgages mean borrowers are vulnerable if interest rates rise, have less disposable income to spend in the wider economy and are more likely to retire in debt. For younger people, buying property becomes increasingly difficult, further widening intergenerational inequality.
While regulators are starting to get nervous, there are few signs of meaningful action in most countries. They expect the market will start to cool on its own, arguing that a decade-long focus on higher lending standards combined with the prospect of low interest rates for an extended period means there is no obvious trigger for a crash. Much of the activity is also being driven by owner-occupiers rather than investors, who typically don’t all head for the door at once if prices start to drop.
So for now, expect the wild stories to keep coming. Here are a few of the most startling ones we’ve come across.
Canada
As a real estate agent, Kristin Cripps knew the market was hot in Barrie. Prices in the fast-growing city about an hour and a half’s drive north of Toronto have been pushed skyward as buyers hunt for larger homes or vacation properties on scenic Lake Simcoe.
Yet nothing prepared her for selling her one-bedroom vacation home. It’s not a remarkable property—Cripps says it looks like “a small box” from the outside—but within 24 hours of listing, 192 showings had been booked. And that was only the start.
Throughout the following three days, bidders and agents kept showing up without an appointment, tramping through the snow to bang on the door while Cripps conducted virtual viewings inside.
The property’s narrow driveway became so congested, no fewer than six cars ended up in a ditch and needed to be towed out. At the height of the bidding war, Cripps estimates she was getting about 75 emails every 20 minutes, and didn’t sleep more than two or three hours a night as she tried to keep up with all the inquiries. In the end she received 71 offers. The property, listed for C$399,000 ($328,665), sold for almost twice that sum—C$777,777.
“You know when you see videos of Black Friday and everyone rushes in and they’re grabbing stuff and they’re having fights in the store and pulling people’s hair and there’s security and they’re grabbing people? That’s what it felt like,” Cripps said.
“Everyone was just so hot and bothered to get a property.”
Australia
It didn’t have a kitchen or a toilet or power, let alone flooring or paint. Yet the semi-derelict home about seven kilometers (4.4 miles) south of Sydney’s city center sold anyway—for A$4.7 million ($3.5 million), after a heated bidding war.
It’s just one more jaw-dropping sale in the harborside city, where more than half the houses sold this year fetched at least A$1 million and quarterly gains to May were the highest in more than 30 years. House prices rose by A$1,263 a day in May, while Australia’s housing market just wrapped up its best fiscal year since 2004, figures showed Thursday.