Overheated markets, Australia, Canada and Sweden, facing some of the sharpest drops in house prices The Economist
A mortgage binge fuelled by rock-bottom interest rates has left each country with enormous quantities of household debt.
As a share of disposable income, such debt sits at 185% in Canada, 202% in Australia and 203% in Sweden.
By contrast, debt levels have shrunk in countries that bore the brunt of the last crash, including America, Ireland and Spain.
In Australia, Canada and Sweden home prices have more than doubled since 2007, compared with rises of 50% in Britain and 61% in America.
Housing busts and recessions that are preceded by this sort of debt build-up tend to be more severe.
Excessive leverage makes people more vulnerable to job losses, interest-rate rises and falling house prices, as was demonstrated by America during the Depression and the more recent financial crisis.
With central banks now raising rates at the fastest pace in more than four decades, countries drowning in mortgage debt will once again be exposed to nasty consequences.
The Economist 24 November 2022
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