BOOM OR BUST?

Well, it's time to take stock. Prices are rising rapidly in a number of locations – they are up 20 per cent in Shanghai and Hong Kong since the start of this year. Up by half for some homes in Seoul, South Korea. They are up by a relatively modest 4 per cent in Switzerland, where the top end of the market is doing most well. In Britain, prices have been rising for several months, also mostly for multi-million pound luxury homes.

Is this the start of a sustained recovery in housing markets or just a mirage? Well, China and South Korea do seem to be enjoying something of an economic resurgence courtesy of their respective governments' financial stimulus packages. There is a danger they may overdo it and the resulting spirals of speculation, inflation and oversupply turn recently turned busts-to-booms back into busts again.

Hong Kong's economy is still in a dire state, so its property market upturn may be premature. However, when those Chinese exports start pouring through its port again, the economy may bounce back, and quickly. But first, the rest of the world must want China to make its cars, clothes and other stuff in vast quantities again.

In London, financiers are on course to make £4 million in bonuses this year. Traditionally, a large chunk of this bonus money goes into luxury houses, penthouses and manor houses. This year will be no exception. Indeed, property may be more popular than ever, because of its reputation for being a secure investment. Looming public sector cuts and tax rises after the next year's general election will suppress the mass market and may dampen the luxury market in the longer term.

Switzerland is a safe haven for the rich, so it shall continue to attract the wealthy from Britain and other countries where governments are looking for bankers, stockbrokers and others like them to pay a fairer share of tax. Possibly, Switzerland's boom is the most sustainable, because there are still plenty of rich in the world despite the economic downturn. All the Alpine state has to do is lure them in with the promise of shelter, a policy it has pursued with great success for decades. Markets may come and go, but there will always be people in the world who are rich.

You can read more about what is happening in the property markets mentioned here by reading recent entries on this blog.

(All The World's a Home : Global Property News)