The recession hits home

Published Wednesday, January 28, 2009 4:55 PM
How far  could  housing investment fall in the current crisis? The chart below shows how much further spending could still weaken before reaching previous lows.

  
Source: OECD Economic Outlook database  

Housing investment covers public and private spending on construction and renovation. In many OECD countries spending, calculated as a percentage of GDP, still remains above troughs reached in previous downturns – and economists believe the recession we have entered will be at least as severe as any experienced since 1980.     

In the Netherlands, Belgium, Canada and Denmark, spending at the end of 2008 was still well above the previous lows seen in the period from 1980. Further falls in these countries are likely as the recession hits the construction industry and weakens demand.   

In Japan, Germany and  the US housing investment data from the fourth quarter of 2008 was already weaker than the average of previous troughs seen over the past 28 years. In Germany and Japan in particular, OECD economists say a further sharp weakening of housing investment is unlikely. German investment - at less than 6 percent of GDP – is at a historic low while stricter building regulations had already triggered a sharp fall in Japanese housing investment in 2007.

Further reading:

by Cynthia Coutu
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Comments

# Randal from Perth, Australia said on Sunday, March 08, 2009 12:27 AM

All housing investments should be taken into a longer term context. Looking at housing markets in a fiscal view will often lead to sensational scares like the graph above. However, experts know that housing prices in stable economic countries are cyclic, and usually yield long term results.

For example - if you look at the chart shown in the following link (which shows median housing price in Perth, Western Australia) - it shows that housing prices have fallen since 2007 - and are likely to fall some more. However, if you look at the prices compared to 2003 figures, which is only 5 years, prices have increased 100% and more.

reiwa.com/.../res-salesgraph-display.cfm

Using the market in Perth, above, you would be on a very sound investment if you invested 4 years or more. Without looking at each country's specifics, I wouldn't be surprised if these trends were similar.

Back to the context of the chart in this article - I would only be "scared" if I was a recent investor - within the last 2 years. Then, if you put yourself into a patient state, you may be surprised to see them rise again in the future...

# RaiulBaztepo said on Sunday, March 29, 2009 9:10 AM

Hello!

Very Interesting post! Thank you for such interesting resource!

PS: Sorry for my bad english, I'v just started to learn this language ;)

See you!

Your, Raiul Baztepo