This is probably not the first thing you read about whether we are in a bubble or not when it comes to house prices. It is as emergent an issue in the US as it is in Europe:
The Economist has a recent article on German economy, which explains how German real estate is undervalued compared to the rest of the Euro Zone, and, complementary, shows us how Euro Zone house prices have increased over the past decade and a half:
This article has a very interesting figure on house prices to income, which makes comparison between countries possible–but also tells us whether house prices grow more than income. That is actually the case in the Euro Zone, but not in Germany, according to the Economist article. I wanted to see what this looked like in Denmark, and with the (free and available) data I could find, the figure looks like this:
The way to interpret the figure is that house prices have increased much more than income in the 90’s, in fact so much, that the house price to income ratio has increased by more than 30% in the time period. This is hardly any breaking news, but–nevertheless–interesting. I would really love to have find source data, that would enable me to copy the methodology of the Economist, so we could compare those findings with the Euro Zone, but so far I had to pay for the data. If anyone has anything on this, let me know.
Note: Source Statbank Denmark. Income is taxable income per taxable individual and not inhabitant and thus not directly comparable to the Economist figure that rely on other assumptions. Further, income has not been adjusted for purchasing power parity. I disclaim all responsibility for this figure and any actions by any individual following this figure.
