Europe must move more aggressively to tackle its property bubbles

ONCE again, the spectre of property bubbles has reared its ugly head - this time in as many as (at least) seven countries, all at once.

The Organisation for Economic Cooperation and Development (OECD) has warned that property prices, both residential and commercial, have risen to dangerous levels in Australia, New Zealand, the UK, Canada, Sweden, Germany and Switzerland. The OECD's chief economist Catherine Mann has pointed out that the "very high" prices in these countries are "not consistent with a stable real estate market". This has created serious vulnerabilities - initial price corrections in overvalued property markets "could be magnified by fire-sales" if investors had been "betting on continued price gains due to monetary policy support". The OECD measures overvaluation on the basis of ratios of property prices to both income and rentals.

Other sources have also red-flagged property bubbles. Last November, the European Central Bank's Systemic Risk Board warned that real estate valuations were stretched in Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, Sweden and the UK.