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“Using an average of these measures, house prices in New Zealand appear the most over-valued, followed by Canada, Sweden, Australia and Norway,” it said. “According to the model, the probability of a housing bust over the next five to eight quarters is the highest in Sweden and New Zealand at 35 to 40 per cent.”

A graph in the report shows that New Zealand’s probability of a housing bust is just above 40 per cent, while Sweden’s is just above 35 per cent. The risk of a bust in Canada is about 30 per cent, while in Norway, Australia and Switzerland the probability is assessed at 20-25 per cent.

New Zealand house prices have surged 60 per cent since 2010, while Sweden’s have risen 41 per cent, according to data compiled by the Bank for International Settlements. New Zealand’s central bank last week forecast house-price inflation would slow to 5 per cent this year from 14 per cent in 2016, but remain positive through mid-2020.

Goldman said the pace of credit growth over the prior five years is an important indicator of asset-price busts. Its housing bust model also includes the house price-to-rent ratio, past changes in real house prices, the investment-to-GDP ratio, real GDP growth, and inflation.

“The probability of a house-price bust has been picking up across the smaller G-10 markets in recent years — a result of rising prices and high credit growth,” it said.

Immigration, Low Rates

While residential investment in Sweden and New Zealand are high, immigration booms and population growth in both countries are supporting construction demand, Goldman said. “In contrast, Australia, Norway, and Canada appear overbuilt,” with home-building activity outstripping the demographic demand for housing, it said.