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Europe's Housing Boom: How Much Longer?

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Here is an interesting article from Elliott Wave International


European real estate boom is shifting patterns. While in the past the main hotspots have been in…well, hotter spots like Spain and France, now the biggest growth is concentrating in the European north.

A new report by the UK’s Royal Institution of Chartered Surveyors says that the current “house price inflation” frontrunners are Estonia and Denmark with growth rates of 28% and 22% a year, respectively. In Spain and France, the former price leaders, house values are only adding the “measly” 15% and 10% a year, respectively (EUobserver).

Britain’s real estate, another recent favorite, is also lagging behind the new EU champions: Last year’s growth was only 2%. But it may be too early to say that the days of double-digit growth in the UK are over, because there are signs that the housing market is making a comeback. According to InvestmentandBusinessNews.co.uk, British again “seem to want to put every spare penny into property. Some individuals even suggest their home in their pension.”

In other words, Europeans’ fascination with real estate continues. And what everyone wants to know is, how much longer?

You may be surprised, but a look at the long-term trend in European stocks may help figure this out. We once did a long-term study comparing U.S. stock prices to U.S. real estate values in 1837-2000. When we plotted the data on a chart, they told quite a story: It turns out that historically real estate prices have always lagged the stock market. In other words, the trend in real estate values is a delayed reflection of the trend in the stock market.

This makes sense. Both the stock and the real estate markets are governed by the people’s attitudes towards these two asset classes – i.e., by social mood. Except, the stock market is a quicker barometer of investors’ collective psychology than real estate. It’s just easier to buy or sell a stock than a house, which is why housing is a slower boat. But one thing for sure: Where stocks go, eventually so do housing prices.

Analysts worry that Europe’s rising interest rates may put an end to the real estate boom. Instead, they should worry about the long-term trend in European stock indexes. After losing a better portion of their value in 2000-2003, they have recovered strongly; many even pushed to new all-time highs recently. If European stocks can sustain their advances, it would confirm that Europe’s social mood is indeed on a firmer ground. And that confidence will improve the housing market’s chances of staying buoyant

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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