## For Home Prices in London, Check the Tokyo Listings

_IMF Blog, April 10, 2018_

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## Bibliographic details
- Authors: Jane Dokko, Claudio Raddatz
- Published: April 10, 2018

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### Key findings
- House prices around the world have shown a growing tendency to move in the same direction at the same time.
- IMF study covered 44 cities and 40 advanced and emerging-market economies.
- The growing integration of financial markets is an important driver of greater house-price synchronization.
- In 2017, growth picked up in 120 economies, accounting for three-quarters of world GDP — the broadest synchronized growth surge since 2010.
- In countries more open to global capital flows, prices of both homes and equities tend to be more synchronized with global markets.
- Policy actions to cool down hot housing markets remain effective and can reduce house price synchronicity.

### Drivers of house-price synchronization
- Interest rates:
  - Major central banks have kept interest rates unusually low for a long time, producing low borrowing costs globally, including cheap mortgages, which has helped push up house prices.
- Institutional and investor activity:
  - Institutional investors, private equity firms, and Real Estate Investment Trusts have been increasingly active in major cities such as Amsterdam, Sydney, and Vancouver seeking higher returns.
  - Wealthy individuals have purchased properties in major financial centers (for investment and residence), disproportionately increasing prices in high-end neighborhoods in cities like New York and London.
- Real economy coordination:
  - Broad-based economic growth boosts demand for homes and therefore prices; the 2017 synchronized growth surge is highlighted as an example.
- Asset-like behavior:
  - House prices are beginning to behave more like prices of financial assets (stocks and bonds), influenced by international investors and global market conditions.

### Policy implications and recommendations
- Monitor synchronous house-price movements closely because homes are typically:
  - The biggest asset for most families.
  - The biggest liability for many households, in the form of mortgages.
  - A major exposure for banks through real estate loans, increasing financial sector vulnerability to housing swings.
- Targeted housing-market measures that remain effective:
  - Raising property taxes and stamp duties.
  - Limiting the size of a home loan in relation to a home’s value (loan-to-value limits).
- Broader policies to enhance resilience to global financial shocks:
  - Flexible exchange rates to give policy makers more control over domestic borrowing costs.
  - Policies to protect consumers against excessive indebtedness during housing busts.

### Context and source
- These findings and recommendations are discussed in Chapter 3 of the latest Global Financial Stability Report.

*Jane Dokko, Claudio Raddatz Kiefer — April 10, 2018*

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## References

- [Global Financial Stability Report](http://www.imf.org/en/Publications/GFSR/Issues/2018/04/02/Global-Financial-Stability-Report-April-2018)
- [https://www.imf.org/wp-content/uploads/2018/04/eng-april-4-gfsr-ch3-5.jpg](https://www.imf.org/wp-content/uploads/2018/04/eng-april-4-gfsr-ch3-5.jpg)

_Source: https://www.imf.org/en/blogs/articles/2018/04/10/for-home-prices-in-london-check-the-tokyo-listings_