These are the biggest housing bubbles in the world, on Bloomberg research

House prices are rising in Australia and around the world, but is it a bubble?

The biggest bubbles are in the housing markets of New Zealand, Canada and Sweden, but Australia takes 15th place in new global rankings by Bloomberg Economics.

And, the frothiest real estate markets are ringing alarm bells not heard since before the global financial crisis, the report warns.

“A cocktail of ingredients is sending house prices to unprecedented levels worldwide,” wrote economist Niraj Shah, Bloomberg reports.

“Record low interest rates, unparalleled fiscal stimulus, lockdown savings ready to be used as deposits, limited housing stock, and expectations of a robust recovery in the global economy are all contributing.”

These are all factors evident in Australian property, where home-buyers have been taking advantage of ultra-low borrowing costs to buy their first homes or upgrade to a more spacious residence with room to work remotely. Buyers have been drawing down on cash saved during lockdown and competing for the few properties on the market.

Local housing prices have jumped since the depths of the pandemic, with Sydney home values up 11.2 per cent in the past year, Melbourne up 5 per cent, and double-digit rises for Canberra, Hobart and Darwin, on CoreLogic figures.

Australian housing took 15th spot in the report on bubble risk, which measured each country’s home price to rent ratio and price to income ratio, to see if price gains were sustainable or if there is a risk prices could fall. It also looked at price growth, and growth in home loans.

For many developed countries, the price ratios are now higher than they were before the financial crisis, the report said.

The riskiest housing markets were in New Zealand, Canada, Sweden, Norway, the UK, Denmark, the US, Belgium, Austria and France, the report found.

With interest rates low, the report said there was no obvious trigger that would cause housing prices to fall, but it warned that when interest rates rise, real estate markets will face a test.

A separate report late last year ranked Sydney 16th on a global real estate bubble index, just as the city’s market was starting to recover from the shock of COVID-19. The UBS research called Sydney “overvalued” and said the Reserve Bank of Australia’s interest rate cuts had sparked a “straw fire” for housing prices.