Weekly Economic Briefing

Bubble talk

15 April 2014

Global Overview

  • Housing markets are staging a recovery in much of the developed world, but don’t fall for exaggerated talk of bubbles. Instead, focus on the positive spillovers.
  • A case in point is the UK, where national activity is accelerating without overheating, yet. Activity has slowed in the US, but we expect the structural pickup to resume as fundamentals and weather conditions prove more supportive.
  • Conditions aren’t as rosy in Spain and Ireland, where the legacy of the last house price bubble will haunt the region for some time to come. In Japan, demographics and stagnating incomes will continue to be a drag on the sector.
  • Meanwhile, the problems are just beginning for emerging market housing markets, where deleveraging is still to come.
  • In particular, China is facing a slowdown in housing demand, and with supply not following suit, we expect this mismatch to have meaningful effects on prices.


The recent pullback in residential investment shouldn’t be taken as a sign of a derailed housing market. Fundamentals are supportive and the Fed wants to continue to support the recovery.


UK housing market activity is accelerating alongside the economic recovery. Should we see signs of overheating, expect a reaction from the Financial Policy Committee


Most Euro-zone countries saw robust house price growth in the lead up to crisis. However, Ireland and Spain experienced outright bubbles which are likely to leave long-lasting scars on their economies.


The real estate market in Japan may have been displaying signs of life but the prospect of a full scale resurrection is exaggerated.

Emerging Markets

Long-term drivers of Chinese housing demand are beginning to wane at a time when property developers are ratcheting up investment, leading to a supply/demand mismatch.


Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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