What can cause a house price (property) bubble?

A house price bubble occurs when the prices of houses in a particular market rise rapidly and reach unsustainable levels, leading to a situation where a correction or sudden drop in prices is likely.

House price bubbles can be caused by a variety of factors, including:

1. Low interest rates: Low interest rates can make it cheaper for people to borrow money to buy houses, leading to increased demand and higher prices. If interest rates rise suddenly, demand may drop and prices may fall, leading to a correction in the market.
2. Speculation: When people expect prices to rise in the future, they may start buying houses as investments, leading to increased demand and higher prices. If speculation becomes widespread, it can create a self-fulfilling cycle of price increases that can eventually become unsustainable.
3. Inadequate housing supply: If there is not enough supply of houses to meet the demand, prices may rise rapidly, particularly in areas where population growth or migration is increasing demand.
4. Easy access to credit: When lending standards are lax, people can take out mortgages with minimal or no down payment, leading to increased demand and higher prices.
5. Economic boom: When the economy is growing strongly, people may have more money to spend on houses, leading to increased demand and higher prices.

In conclusion, a house price bubble can occur when a combination of factors creates unsustainable demand for housing, leading to rapid price increases. When prices reach unsustainable levels, a correction or drop in prices is likely, which can have serious impacts on the economy, particularly for those who have bought houses at the peak of the market.

Some recent examples of countries where there has been a house price bubble include:

1. Australia: In the late 2000s and early 2010s, Australia experienced a house price bubble, driven by low interest rates, easy access to credit, and strong economic growth. Prices in major cities such as Sydney and Melbourne reached unsustainable levels, leading to a correction in the market.
2. Canada: In the early 2010s, Canada experienced a house price bubble, particularly in cities such as Vancouver and Toronto. The bubble was driven by low interest rates, easy access to credit, and strong immigration-fueled demand. Prices reached unsustainable levels, leading to a correction in the market.
3. United Kingdom: In the mid-2000s, the United Kingdom experienced a house price bubble, driven by low interest rates, easy access to credit, and strong economic growth. Prices in major cities such as London reached unsustainable levels, leading to a correction in the market, particularly after the 2008 financial crisis.
4. United States: In the mid-2000s, the United States experienced a nationwide house price bubble, driven by low interest rates, easy access to credit, and speculation. The bubble burst in 2007 and 2008, leading to a sharp correction in the market, the 2008 financial crisis, and a severe recession.