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usinessadviceTHE REALESTATE BUBBLEGOES GLOBALUp to 2008, nearly everyone (except the savvy few) believed ineverlasting real estate growth – you simply could not lose investingin property. Enter the US subprime crisis, and most know now thatit is indeed possible – house prices can collapse – and when theydo, bad things happen.There are many that believe that this was merely a US and UKphenomenon (with perhaps a few European culprits thrown in),fueled by silly economics, greed and banking indiscretions acrossthe sea.James Paynter is Head Market Analyst withDynamic Outcomes.3. Two of the most spectacular rises in property prices have been Australiaand New Zealand . But note the change in trend with Australianprices – the bubble has likely burst here too.The SA market has outperformed all these other markets with its hyperbolicgrowth in house prices.Your ChamberBut, the real estate bubble is a global phenomenon.And here’s the proof:The above Chart of Global House Price Indices puts the US real estatebubble into perspective with the rest of the world – if the US bubble wasbad, the situation is far, far worse in the rest of the world.1. For a start, the Japanese real estate mania is a window for the future– an incredible mania in the 1980s which finally peaked in 1991. It hasnot recovered since, falling back to levels seen before the mania started– which is characteristic of a market bubble.2. While the US real estate bubble attracted a lot of attention, the situationwas as bad across in Europe, especially with three of the PIIGS – Ireland,Greece and Spain. The Euro area has managed to maintain houseprices at relatively constant levels, but this only because the housingmarkets in richer member states have matured later than the weakerones. But these, too, will soon follow suit, and signal a plunge in Europroperty values as a whole.But there is a very significant pattern that has developed – an ascendingwedge pattern (see dashed lines). This is an ending pattern, and oncethe market breaks below the lower support line, the whole move is over– which it HAS DONE.The verdict: Expect SA real estate to fall spectacularly over thecoming years.And if we need any more proof, ABSA Bank suffered their biggest dropin share price in almost a decade, following the announcement of an“increase in credit impairments on the group’s mortgage legal book.Property prices and distressed customers remained pressured resultingin higher impairments requirements on our mortgage legal book.”Does this not sound familiar? Remember the term sub-prime lending?Wait until the market prices start to fall and the change in trend is firmlyin place. The bottom line: Expect a lot more of this bad property news –locally and internationally.42 September 2012 Infocom Join the Bay’s Business Conversation