{
  "title": "Managing House Price Booms in Emerging Markets",
  "publication": "IMF Blog, December 10, 2014",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2014/12/10/managing-house-price-booms-in-emerging-markets",
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  "summary": "Author: Min Zhu",
  "sections": [
    {
      "heading": "Overview / House Price Index",
      "content": "- Author: Min Zhu\n- Date: December 10, 2014\n- For the past decade, house prices have steadily increased in the vast majority of the 30 countries that make up the IMF’s House Price Index for Emerging Markets.\n- The index shows a lull in the aftermath of the global financial crisis, followed by an increase for nine consecutive quarters since 2012.\n- This run-up is described as four times as fast as that in advanced economies.\n- The run-up would be even more pronounced if larger countries in the group such as China and India receive greater weight in the index."
    },
    {
      "heading": "Housing and Credit Booms: double trouble?",
      "content": "- Historical concern: house price surges accompanied by booms in credit availability are more likely to end in busts; recoveries from those busts are slower and more costly in terms of lost income.\n- Since 2009, house price increases have been higher in countries (e.g., China) where there has been more rapid growth in credit availability.\n- Statistically, credit growth can account for nearly half of the variation in house price increases across countries since 2009.\n- Figure references (in source): Figure 1 (index), Figure 2 (credit growth)."
    },
    {
      "heading": "Macroprudential policies and other tools",
      "content": "- Policymakers are deploying a trinity of policies: monetary policy, microprudential policies, and macroprudential policies.\n- Macroprudential measures include both broad-based tools and sectoral tools targeted at housing markets:\n  - Limits on the loan-to-value (LTV) ratio, which cap the size of the mortgage loan relative to the value of the property associated with the loan.\n  - Limits on the debt-service to income (DSTI) ratio, which restrict the size of a debt service payment to a fixed share of household income.\n  - Sectoral capital requirements, which force lenders to hold extra capital against loans to a specific sector, such as real estate.\n  - Provisioning requirements, which force lenders to build reserves against an eventual nonpayment of loans to particular sectors.\n- Purpose: curb unsustainable credit build-up to prevent house price bubbles, or ensure lenders have adequate buffers in the event of a bust.\n- Emerging markets are active users of these tools; macroprudential tools have been actively used since 2000, including by many Asian economies.\n- Conference context: IMF and the Indian Institute of Management in Bangalore, India."
    },
    {
      "heading": "Evidence on effectiveness and important nuances",
      "content": "- IMF staff speech at the Bangalore conference provides evidence of overall success in curbing both credit growth and house price growth.\n- Important caveats:\n  - Measures to curb credit growth were less effective when there was high demand for houses from foreign buyers using cash instead of borrowing from the banking system.\n  - Dampening house price acceleration was not always successful unless measures were fairly targeted.\n  - Example: Korea had to specifically target the Gangnam suburb to curb speculative pressures on house prices."
    },
    {
      "heading": "Housing finance, supply challenges, and reform areas",
      "content": "- Housing finance systems remain underdeveloped in many emerging markets; providing affordable housing is a key challenge.\n- Market mismatch: in many cities (e.g., many cities in India) there is excess supply in the high-end segment and lack of supply in the low and middle segments.\n- Conference participation includes experts on sustainable housing finance systems, public-private partnerships, and managing urbanization.\n- Cross-country variation in mortgage market size can be traced to:\n  - Differences in legal systems (weak lender protection results in fewer loans).\n  - Strength of credit information systems.\n  - Onerousness of the property registration process.\n  - Country’s history of macroeconomic instability.\n- Country examples and exact figures:\n  - Brazil has a small mortgage market (under 5 per cent of GDP).\n  - Malaysia mortgage loans are over 30 percent of GDP."
    },
    {
      "heading": "Key takeaways and policy implications",
      "content": "- Twin booms in house prices and credit raise the risk of costly busts; monitoring both is essential.\n- Macroprudential policies—broad-based and sectoral—are an important complement to monetary and microprudential policies.\n- Targeting matters: sectoral and geographically targeted measures can be necessary to address localized speculative pressures.\n- Nonfinancial considerations (legal frameworks, credit information, property registration, macroeconomic stability) influence the depth of mortgage markets and should be part of reform efforts.\n- Policymakers face the dual mandate of expanding access to housing while avoiding excessive risk-taking that could lead to severe losses.\n\nSource: Managing House Price Booms in Emerging Markets — Min Zhu, December 10, 2014.\n\n---\n\n Content in this bundle\n\n- 新兴市场房价上涨的管理; iMFdirect博客; 2014年12月10日\n  - 新兴市场房价上涨的管理; iMFdirect博客; 2014年12月10日 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 新兴市场房价上涨的管理; iMFdirect博客; 2014年12月10日 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- conference\n- https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-1.jpg\n- https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-2.jpg\n- credit growth\n- https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-3.jpg\n- speech by IMF staff\n\nSource: https://www.imf.org/en/blogs/articles/2014/12/10/managing-house-price-booms-in-emerging-markets"
    }
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    "Authors: Min Zhu",
    "Published: December 10, 2014",
    "Author: Min Zhu",
    "Date: December 10, 2014",
    "For the past decade, house prices have steadily increased in the vast majority of the 30 countries that make up the IMF’s House Price Index for Emerging Markets.",
    "The index shows a lull in the aftermath of the global financial crisis, followed by an increase for nine consecutive quarters since 2012.",
    "This run-up is described as four times as fast as that in advanced economies.",
    "The run-up would be even more pronounced if larger countries in the group such as China and India receive greater weight in the index.",
    "Historical concern: house price surges accompanied by booms in credit availability are more likely to end in busts; recoveries from those busts are slower and more costly in terms of lost income.",
    "Since 2009, house price increases have been higher in countries (e.g., China) where there has been more rapid growth in credit availability.",
    "Statistically, credit growth can account for nearly half of the variation in house price increases across countries since 2009.",
    "Figure references (in source): Figure 1 (index), Figure 2 (credit growth).",
    "Policymakers are deploying a trinity of policies: monetary policy, microprudential policies, and macroprudential policies.",
    "Macroprudential measures include both broad-based tools and sectoral tools targeted at housing markets:",
    "Purpose: curb unsustainable credit build-up to prevent house price bubbles, or ensure lenders have adequate buffers in the event of a bust.",
    "Emerging markets are active users of these tools; macroprudential tools have been actively used since 2000, including by many Asian economies.",
    "Conference context: IMF and the Indian Institute of Management in Bangalore, India.",
    "IMF staff speech at the Bangalore conference provides evidence of overall success in curbing both credit growth and house price growth.",
    "Important caveats:",
    "Housing finance systems remain underdeveloped in many emerging markets; providing affordable housing is a key challenge.",
    "Market mismatch: in many cities (e.g., many cities in India) there is excess supply in the high-end segment and lack of supply in the low and middle segments.",
    "Conference participation includes experts on sustainable housing finance systems, public-private partnerships, and managing urbanization.",
    "Cross-country variation in mortgage market size can be traced to:",
    "Country examples and exact figures:",
    "Twin booms in house prices and credit raise the risk of costly busts; monitoring both is essential.",
    "Macroprudential policies—broad-based and sectoral—are an important complement to monetary and microprudential policies.",
    "Targeting matters: sectoral and geographically targeted measures can be necessary to address localized speculative pressures.",
    "Nonfinancial considerations (legal frameworks, credit information, property registration, macroeconomic stability) influence the depth of mortgage markets and should be part of reform efforts.",
    "Policymakers face the dual mandate of expanding access to housing while avoiding excessive risk-taking that could lead to severe losses.",
    "**新兴市场房价上涨的管理; iMFdirect博客; 2014年12月10日**",
    "[conference](http://www.imf.org/external/np/seminars/eng/2014/housing/)",
    "[https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-1.jpg](https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-2.jpg](https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-2.jpg)",
    "[credit growth](http://www.imf.org/external/research/housing/)",
    "[https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-3.jpg](https://www.imf.org/wp-content/uploads/2014/12/housepricebooms-in-ems-chart-3.jpg)",
    "[speech by IMF staff](http://www.imf.org/external/np/speeches/2014/121114.htm)"
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