Warning of the risk of a new global property bubble not seen since the 2008 recession, Bloomberg Economics has recently released a study of the countries with the most worrying property bubble risk indices.

Of the 23 member countries of the OECD, Portugal placed 13th in the nations most at risk of a housing bubble. That's a fair way behind the countries with the highest “bubble rating” – New Zealand, Canada and Sweden.

While these nations are in the red zone on virtually every indicator, they're closely followed by Norway, the UK, Denmark and the US. Completing the top 10 of countries with the highest bubble risk are Belgium, Austria and France.

The study analysed five risk variables – the relationship between prices and rents, the relationship between prices and income, real price growth, nominal price growth and credit growth in annual terms – to predict the possibility of the outbreak of a housing bubble.

Boom and bust?
“The extraordinary stimulus that has helped to get the global economy back on its feet is also fuelling a new problem: housing bubbles,” explained economist Niraj Shah, who is responsible for the report.

As he explains, the coronavirus has brought a “cocktail of ingredients that are pushing house prices up to unprecedented levels around the world”, including low interest rates, unparalleled fiscal stimulus, blocked savings ready to be used, limited housing stock and expectations of a solid economic recovery.

According to Niraj Shah, however, “although the risk metric grows, there are reasons to expect that the coming period will be characterised more by a cooling than by a collapse”. He adds that “the resilience of the boom real estate will be put to the test” when interests begin to rise and loans become more expensive.

For more information on buying or selling a home in the Algarve, get in touch with the experts at Algarve Home Sales.