Typical street scene in Santa Ana, El Salvador. (Photo: iStock)

Typical street scene in Santa Ana, El Salvador. (Photo: iStock)

IMF Survey: Global House Prices Still Showing Down Trend

September 17, 2012

  • Prices still falling in roughly half of 54 countries tracked around world
  • Brazil, Germany among countries seeing house prices rise
  • Within United States, housing picture varies considerably

House prices in the United States have started to pick up a little recently, but globally prices are still on a down trend, according to research by the International Monetary Fund (IMF).

Global House Prices Still Showing Down Trend

View of homes in Zella-Mehlis, Germany. Brazil and Germany have seen substantial increases in house prices (photo: Soeren Stache/Newscom)


Price trends vary widely between countries, with Ireland, Greece, Portugal, and Spain seeing the biggest falls in the past year and Brazil and Germany, substantial increases.

While overall the trend is mixed, there is no sign of an uptick in the global index of house prices, a weighted average of prices in 54 countries, according to our research. The index remained level during the second quarter of 2012—the latest quarter for which consistent data is available for a large group of countries—and the GDP-weighted index continued to decline (see Chart 1).

Global housing boom-bust

Our research, published in a new IMF Working Paper, documents the magnitude and characteristics of the global housing boom-bust and examines the impact of house price corrections on the overall economy. The analysis was conducted based on an international sample covering both developed and developing countries.

We found that price trends vary widely between countries, with Ireland, Greece, Portugal, and Spain seeing the biggest falls in the past year and Brazil and Germany, substantial increases (see Chart 2).

The findings suggest that long-run price dynamics are mostly driven by local factors such as income and population growth. The effect of more globally connected factors such as interest rates appears to be less strong.

Attractive views

IMF staff reports listed below include an assessment of conditions in individual countries’ housing markets.

Germany Staff report, Article IV (p.8)
Ireland Staff report, Article IV (pp. 6, 7)
Lebanon Staff report, Article IV (p.8)
Norway Staff report, Article IV (pp.12–14)
Philippines Staff report, Article IV (p.28)
Singapore Staff report, Article IV (p.41
Sweden Staff report, Article IV (p.27)
United Arab Emirates Staff report, Article IV (p.6)
United States Staff report, Article IV (p.51)

Credit market conditions can have an impact in the short run and, ultimately, when the correction starts, affect both financial stability and the overall economy.

Driving factors

Our econometric model of the determinants of house prices explains house price growth based on several short-run factors, such as growth in incomes, asset prices, and population, and long-run-factors, such as the ratio of house prices to incomes.

The difference between actual house prices and those predicted on the basis of these fundamental factors gives another indication of whether prices may have more room to fall.

The results from this exercise show that in many countries the declines in house prices over the past five years are close to, or even exceed, what was predicted by the model.

Closer look inside the United States

In the United States, where the subprime mortgage crisis led to a crash in prices that had begun in 2006, our research shows that prices have become more affordable in many parts of the country compared with incomes. Accordingly, the quarterly U.S. housing price data, based on the S&P/Case-Shiller Home Price Index, the leading measure of U.S. home prices, have recently shown a bit of an uptick, with data released last month showing positive annual growth rates for the first time since the summer of 2010.

But further downward adjustment is still likely in some pockets. Moreover, while price indices based on all transactions show some signs of recovery, distressed sales continue to weigh down on prices in certain segments.

In large countries such as the United States, housing markets can differ considerably across regions (see Chart 3).

With U.S. house prices falling substantially over the past few years, housing affordability improved in most U.S. states last year. In most states, a family making the median income for the state could afford the median-priced house. There were still a few states, along the coasts, where the median house still remained out of reach of the median household.

A similar picture emerges when looking at price-to-rent ratios by metropolitan areas: house prices remained out of line with rents in some areas along the coasts.