Real Estate Prices Around the World, Part 2
Bryan Taylor, Economist, Global Financial Data
Japan has probably shown the wildest swings in real estate prices of any country that we cover as can be seen in Figure 11. After the devastation of World War II and the inflation that followed, real estate prices crashed during the 1940s. Real estate prices showed dramatic increases during the 1950s and 1960s. The price of real estate increased five-fold in the 1950s and more than tripled in the 1960s. Prices increased 30-fold between 1949 and 1973, though they had only doubled since the end of the war. Prices fell after the 1973 peak, losing one-third of their value during the next five years. Between 1978 and 1989 another dramatic surge in prices occurred as the price of real estate more than tripled once again. It was said that at the top of the bubble, the imperial palace in downtown Tokyo was worth more than the entire state of California. Obviously, this was just a bubble, and it burst in 1989. The stock market and real estate steadily declined. During the next 15 years, prices declined back to the levels they had been at in the 1970s and they have remained at those levels since 2005. Neither the price of real estate nor inflation has increased during the past 18 years. Both have flatlined. Given this, there is little prospect for rising real estate prices in Japan in the near future.
The price of real estate in the Netherlands has shown dramatic swings over time. As Figure 12 shows, after a steady increase in the price of real estate between 1970 and 1978, real estate prices declined during the 1980s. Beginning in 1990, real estate started to slowly recover for the next twenty years, peaking in 2008 at about three-times the price level in 1990. Inflation rose faster than real estate prices for the next five years before a third dramatic increase in prices occurred. By 2022, real estate prices had risen by 80 per cent since 2013 after inflation. Prices have declined since then. Generally, however, prices have increased since 1990 and continued increases in or a stabilization of real estate prices are likely in the future.
Like Australia, New Zealand has shown a steady appreciation in the price of real estate over time as can be seen in Figure 13. Price increases were minimal during the twentieth century, but after 2002, the steady increase in real estate prices in New Zealand began. Prices doubled between 2002 and 2007, remained steady for the next five years, then more than doubled again between 2011 and 2021. Prices have fallen back since then. Even with the most recent decline, real estate prices have increased almost five-fold during the past 40 years. There is no reason to suspect that real estate prices in New Zealand will not continue to increase.
After the United Kingdom, Norway provides the longest-term history for real estate prices among the countries that we cover. Norway has calculated real estate prices going back 200 years and the data are provided in Figure 14. There was little change in real estate prices in Norway until about 1850. During the second half of the 19th century, real estate prices steadily rose, increasing almost six-fold between 1847 and 1899. However, real estate prices remained dormant for the next 90 years. Prices declined until about 1920, rose during the Roaring Twenties, then declined again until the 1950s. Prices rose until 1987 with most of the increase coming between 1977 and 1987. Prices then declined for five years before beginning their current climb.
During the past 30 years, real estate prices have steadily risen faster than inflation. Real prices increased over four-fold between 1992 and 2022 and show no sign of declining. At some point, housing prices will have to take a breather, but there is no evidence of this yet. Just as in Sweden, real estate prices have increased during the past 30 years and show no sign of abating.