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Housing prices zoomed in Britain and Australia before the big boom in the U.S., and they began to soften earlier. So Americans might be able to get a glimpse into their own future by looking at what has happened in Britain and Australia over the last year or so.
(Pictured: Government House in Canberra, the capital of Australia.)
In a new report, American Express Bank Ltd. in London sees both positive and negative hints from the experience of what used to be known as the Commonwealth.
On the positive side, prices rose even more in the U.K. and Australia than in the U.S., and they haven’t fallen since the boom ended. For example, says American Express, U.S. house prices rose 97% in the decade through the third quarter of 2005, but prices in the U.K. rose 167% through the third quarter of 2004. Also heartening: after a brief lull, prices in the U.K. and Australia have continued upward, albeit at a much slower pace.
On the negative side, the U.S. is already showing more weakness than the U.K. and Australia in the critical category of home construction. In Australia, American Express says, housing starts fell 10% to 15% from their peak. In the U.K., where tight zoning laws prevented a construction boom during the overheated years, construction merely leveled off. In the U.S., in contrast, “permits are down 20% and it looks like homebuilders will cut back further.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.