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IMF Warns of “Synchronization of Housing Prices”
10 April 2018
The IMF says that there is high level of synchronization in global housing prices. An analysis of 40 countries, including Portugal, concluded that this could facilitate the spread of eventual economic and financial crises.
The International Monetary Fund (IMF) released its Financial Stability Report today, which has a chapter on rising house prices after the crisis, analysing housing prices in 40 countries (including Portugal) and 44 cities (including Lisbon), noting that housing prices are rising globally.
Although housing price changes still depend mostly on local factors, such as land use regulations, tax policy and demography, the institution led by Christine Lagarde says, “For the past three decades house prices have become increasingly synchronized between countries, especially between large cities.”
It considers that this is a result of “global financial conditions” that influence housing prices at the local level, especially in developed countries and their larger cities, especially at a time when there are more and more global investors in real estate markets.
The IMF spoke of the “financialisation” of housing, that is, housing being used as a financial asset, and warns of the risk, due to the global financial integration, of shocks in some markets affecting other markets, stating their view that the “high synchronization of prices of housing [could pose] a risk to real economic activity.”
The International Monetary Fund therefore says that measures should be taken to rein in excesses in housing markets, including measures to reduce the synchronization of housing prices.
Vitor Constâncio, vice-president of the European Central Bank (ECB), said on Monday that the risk of a housing bubble should lead to measures being taken, according to the website of the newspaper Eco.
Original Story: Lusa / Diário Imobiliário
Translation: Richard Turner