Housing Prices Continue to Soar in Many Countries Around the World

IMF Blog, October 18, 2021

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While most economic indicators deteriorated last year, house prices largely shrugged off the effects of the pandemic.
Of the over 60 countries that enter into the IMF’s Global House Price Index, three-quarters saw increases in house prices during 2020.
The trend of rising house prices has largely continued in countries with more recent data.
Publication date: October 18, 2021.

Low interest rates contributed to the boom in house prices.
Policy support provided by governments supported demand for housing.
Workers’ greater need to be able to work from home increased demand for housing (in many countries, including the United States, online searches for homes reached record levels).
Supply-side factors: supply chain disruptions raised the costs of several inputs into the construction process, supporting higher house prices.

Increases in house prices relative to incomes make housing unaffordable to many segments of the population, as highlighted in the IMF’s recent study of housing affordability in Europe.
Post-pandemic working arrangements could exacerbate inequality concerns:
- High-earners in tele-workable jobs may bid for larger homes.
- This bidding could make homes less affordable for less affluent residents.
The surge in house prices has impacted headline inflation in some countries and could contribute to more persistent inflationary pressures.
Policymakers are keeping a close watch on developments in the housing sector.

Over a decade ago, a turnaround in house prices marked the onset of the Global Financial Crisis; however, twin booms in household credit and house prices that preceded that crisis—and many previous housing crashes—appear less prevalent today.
A plausible scenario for normalization in house prices includes:
- A rise in interest rates,
- A withdrawal of policy support as economies start to recover,
- A restoration of the timely supply of building materials.
These factors could lead to some normalization in house prices.

This blog is based on work by Hites Ahir, Nina Biljanovska, Chenxu Fu, Deniz Igan and Prakash Loungani of the IMF Global Housing Watch knowledge group.
IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials.
The IMF is an organization of 191 countries, based in Washington D.C.

Source: Housing Prices Continue to Soar in Many Countries Around the World — IMFBlog (October 18, 2021).