Global House Prices: An Update

The IMF’s Global House Price Index—an average of real house prices across countries—continued to climb up in the third quarter of 2016 (Figure 1). This is the sixteenth consecutive quarter of positive year-on-year growth in the index. However, house prices are not rising everywhere around the world. As noted in our Q4 2016 Quarterly Update (and as covered in the Wall Street Journal), house price developments in the countries that make up the index fall into three clusters: gloom, bust and boom, and boom (Figure 2).

 

Fig1

 

The Q1 2017  Quarterly Update digs a little deeper and shows that house prices are also not climbing up everywhere within countries. Figure 3 shows that in many countries, house prices are subdued at the national level compared to the city level.

Fig2

 

Recent IMF assessments provide a more nuanced view of the within country house price developments.

  • On Australia, IMF assessment points out that house price gains have moderated. However, the extent of cooling has varied considerably across cities. The strongest price increases continue to be recorded in Sydney and Melbourne, where underlying demand for housing remains strong. With house prices still rising ahead of income, standard valuation metrics suggest somewhat higher house price overvaluation relative to the previous IMF assessment.
  • On Austria, IMF assessment notes that the cumulative increase in the house price index over 2007–2015 was nearly 40 percent. To a large extent, this increase was driven by price dynamics in Vienna. The OeNB residential price index indicator, which assesses whether prices move in line with fundamental factors, points to an overvaluation of property prices of about 22 percent for Vienna, while prices in the rest of the country appear broadly in line with fundamentals.
  • On Turkey, IMF assessment points out that the housing market exhibits significant variations across cities. Regional variations have been further accentuated by the presence of more than 2.7 million Syrian refugees since March 2011. Cities near the Syrian border, which have absorbed larger masses of Syrian refugees have seen significant rises in local housing prices since 2011, though they have moderated in recent years.

Posted by at 9:20 PM

Labels: Housing

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