Global House Prices: Time to Worry Again?

IMF Blog, December 8, 2016

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The IMF’s Global House Price Index is a simple average of real house prices for 57 countries and is now almost back to its level before the crisis.
Context: During 2007-08, house prices in several countries collapsed, marking the onset of a global financial crisis.
Central question raised: Is it time to worry again about a global fall in house prices?
Judgment in the piece: The present conjuncture is a time for vigilance but not panic.

The current house-price boom is not synchronized across countries, and within countries booms are often restricted to one or a few cities.
Three clusters identified in the Global House Price Index:
- Gloom: 18 economies in which house prices fell substantially during the global financial crisis and have remained on a downward path.
- Bust and boom: 18 economies in which housing markets have rebounded since 2013 after falling sharply during 2007-12.
- Boom: 21 economies in which the drop in house prices in 2007–12 was quite modest and was followed by a quick rebound.
City-level variation example (China):
- Beijing: prices have increased in inflation-adjusted terms by about 25 percent a year in Beijing over the past decade.
- Xian: prices have increased by under 10 percent a year in Xian over the past decade.
Other city examples where local price increases exceed national averages: Amsterdam, Oslo, Vienna.

Unlike many past housing booms driven by excessive credit growth, supply constraints appear to be playing a big role in some current price booms.
Evidence:
- Residential permits have grown only modestly in the "boom" and "bust and boom" country clusters.
- In Copenhagen and Stockholm, the increase in the housing stock has not kept up with population growth, contributing to price increases.
- The IMF has flagged supply constraints in some cities in Australia and Canada, and in many European countries—France, Germany, the Netherlands, Norway, and the United Kingdom.
Implication: Even when price increases reflect supply constraints, their impact on household indebtedness could have adverse implications for financial stability.

National and international regulators are more active in monitoring house price booms and using macroprudential policies than in the pre-crisis period.
Use of macroprudential policies has been quite extensive since the crisis, particularly in the "gloom" and "boom" clusters.
The IMF has been urging macroprudential measures, alongside measures to boost supply, in many countries including Australia, Canada, and several European countries.
Example of regulatory vigilance: The European Systemic Risk Board published country-specific warnings on medium-term vulnerabilities in the residential sector for eight member states: Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, Sweden, and the United Kingdom.
Quotation underscoring policy shift: former Deputy Managing Director Min Zhu — “The era of benign neglect of house price booms is over.”

Source: Global House Prices: Time to Worry Again? — Hites Ahir, Prakash Loungani, December 8, 2016

Global House Prices: Time to Worry Again?
- Global House Prices: Time to Worry Again? (Markdown version)
- Global House Prices: Time to Worry Again? (PDF)
全球住房价格：再次担心的时候到了吗？; IMF博客; 2016年12月8日
- 全球住房价格：再次担心的时候到了吗？; IMF博客; 2016年12月8日 (Markdown version)
- 全球住房价格：再次担心的时候到了吗？; IMF博客; 2016年12月8日 (PDF)
世界の住宅価格: 再び懸念すべき時か; ヒテス・アイール, プラカシュ・ラウンガニ; iMFdirect ブログ2016年12月8日掲載
- 世界の住宅価格: 再び懸念すべき時か; ヒテス・アイール, プラカシュ・ラウンガニ; iMFdirect ブログ2016年12月8日掲載 (Markdown version)
- 世界の住宅価格: 再び懸念すべき時か; ヒテス・アイール, プラカシュ・ラウンガニ; iMFdirect ブログ2016年12月8日掲載 (PDF)
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- Цены на жилье в мире — пора ли вновь беспокоиться? 8 декабря 2016 года (Markdown version)
- Цены на жилье в мире — пора ли вновь беспокоиться? 8 декабря 2016 года (PDF)