In a National Economists Club luncheon in Washington on Thursday, IMF economist Prakash Loungani warned New Zealand, Australia, the Netherlands and Belgium had the “biggest misalignment” with historical price to income ratios and that Canada, Sweden, Norway and Australia had the biggest misalignment in terms of price-to-rent values.
In his analysis of housing bubbles gone bust since the 1970’s, Loungani found that prices in OECD countries last year were still substantially out of whack with rents and incomes compared with average ratios between 1970 and 2000. He predicts further falls in many countries who has already been hit hard with rapidly deflating housing bubbles.
He said the last boom has been so much bigger than previous ones and hence the downturn should be more brutal.
In Australia, our housing bubble is unprecedented. Therefore it is not unreasonable to assume the fall out from Australia’s housing asset bubble popping will also be unprecedented.
» IMF Economist Argues Home Prices Still Have Far To Fall – The Wall Street Journal, 27th May 2010.