Land and Housing Price Bubbles

Hello monkeys,

As an undergrad in Hong Kong, I often keep up with current news and I recently read this one on Bloomberg:


Henderson Land Development Co. outbid eight other developers and will pay a record HK$23.3 billion ($3 billion) for the first commercial land to be sold by Hong Kong’s government in the Central district since 1996.

Office space in Central is the world’s most expensive, according to a CBRE survey released in March, which ranked the rents ahead of those in Beijing districts, Hong Kong’s West Kowloon, London’s West End, midtown Manhattan, and Tokyo.

Similar problems have been spotted throughout the world, like Singapore, London, Tokyo and New York. A quick search on Google News with the keywords “Land Prices” would yield the same problems; in Jakarta, UK, Bangkok, US and many other places.

This led me to another problem in Canada. From the Economist:


STEPHEN POLOZ, the governor of the Bank of Canada, has been warning Canadians about piling up debt to buy overpriced houses since he took office four years ago. At first, he used bankerly language, pointing to the risk of a “disorderly unwinding of household-sector imbalances”. Lately, with household debt at record levels and house prices in Toronto and Vancouver continuing to rise, he has started to speak clearly. “It’s time to remind folks that prices of houses can go down as well as up,”

Various levels of government have been trying to restrain house prices (which Mr.Poloz has encouraged to rise by keeping interest rates low). The federal government has tightened conditions for the mortgage-insurance policies it sells to lenders, which cover more than half of mortgages by value. Last year the government of British Columbia, Vancouver’s province, slapped a tax of 15% on foreign buyers. Ontario, whose capital is Toronto, brought in its own version this year.

My question:

Is the world in any danger of housing bubbles?

A 2003 IMF World Economic Outlook stated that “Bubbles in housing markets are more critical than stock market bubbles. Historically, equity price busts occur on average every 13 years, lasts for 2.5 years, and result in about 4 percent loss in GDP. Housing price busts are less frequent, but last nearly twice as long and lead to output losses that are twice as large”

With such a problem in housing bubble busts, how do you think this problem can be solved? Any thoughts?

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