Housing Prices Continue to Soar in Many Countries Around the World
IMF Blog, October 18, 2021
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Bibliographic details
- Authors: The Editors
- Published: October 18, 2021
Overview
- 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.
Main drivers of the house price boom
- 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.
Policy concerns and distributional effects
- 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.
Risks and a plausible normalization scenario
- 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.
Attribution and authorship
- 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).