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House pricing: Racing to the top

Torsten Steiner

Torsten Steiner, Research Analyst, discusses the political implications of the continuing rise in house prices.

The rise of house prices has been a political issue for some time, particularly in the big cities of New York, London and Paris. However, surprisingly, it is Germany that has seen the highest hike in average housing prices since the financial crisis. Germany has seen a 20% increase in housing prices from 2010 to date, despite political measures being put in place to limit increases in rents. Other steep increases were seen in the United Kingdom, the United States and Sweden. On the other hand, Spain and Italy are just reaching the lowest level of home values since 2010, with a drop in capital values of 15%–20% compared to 2010.  

Broad market forecasts show a continuation in house price growth in the core and advanced mature markets, from Australia, the United States, United Kingdom and Germany. However, these predictions for steep increases will create political pressures to ensure affordability. Rents and mortgages account for the biggest share of personal spending.

The increase in housing costs will need to correlate with higher incomes to be sustainable; there is currently a disconnect.  House prices have been rising faster than income levels, creating additional pressure. An average family in London currently spends more than 50% of their income on rent, a proportion that could increase, if prices and rents outstrip income growth in the future.

The chart below relates to national levels. On a city level, some of these increases will look much more drastic. For example London, New York and San Francisco have surged further beyond their pre-crisis level, outstripping their national growth rates.

House pricing index



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Stefan Wundrak

Stefan Wundrak

Head of European Research

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