The Unassuming Economist

“House prices in Norway rose strongly in recent years but stabilized in late 2012. Various factors have been contributing to rising house prices, including high income and wage growth, immigrant inflows, and supply constraints. Nevertheless, there are signs of overvaluation with a sustained increase in the price-to-income ratio and a large deviation in the price-to-rent ratio from its historical average. Staff’s updated estimates on house price valuation gaps, based on the three measures of valuation used in the background papers for the 2013 Nordic Regional Report and Norway Article IV report, suggest a slight correction in the degree of overvaluation in 2013, but prices remain above equilibrium by varying degrees according to different estimates,” says the IMF’s new annual economic report on Norway.

“A longer-term solution to rising house prices and mortgage levels will require alleviating housing supply constraints. Insufficient housing supply growth is a fundamental factor behind the rise in residential property prices, especially in metropolitan areas, where ongoing urbanization and immigration trends boost demand. This has resulted in higher housing prices, driving up the size of mortgages. While some steps have been taken, containing house price pressures will require a continuing effort to expand the stock of affordable housing and further reforms to zoning, permitting, and the rent-setting process. Public infrastructure investments, coordinated with municipalities, would also make private housing investments more attractive,” according to the IMF’s latest economic report on Sweden. 

“In Q4:2013, prices of mid- and high-end condominiums in upscale areas of metro Manila (only available price series) rose by 13 percent, y/y, similar to growth rates that prevailed prior to the GFC. However, in real terms, condo prices remain below their peak that prevailed prior to the Asian financial crisis. This likely reflects in part the large supply increase in this market segment in recent years. In fact, according to the official Philippine Housing Industry Plan for 2012‒30, supply of units in the mid­- and high -cost segments of the housing market is adequate, while the low-end of the market is characterized by severe shortages. Despite the recent price increases, residential price-to-rent ratios have remained relatively stable at around 14 percent,” says the IMF’s latest report on the Philippines. 

See the IMF’s latest report on Lebanon here.

The real estate sector “(…) has shown growing signs of imbalances and activity has softened in 2014. The challenge is to allow for the necessary correction while preventing an excessively sharp slowdown. The contribution of real estate and construction to growth has been rising; last year, it accounted directly for 12.8 percent of value added, and about 33 percent if upstream and downstream sectors are included. Residential real estate is marked by substantial regional differentiation. Large cities have enjoyed favorable demand conditions—reflecting both underlying and speculative demand—and prices show signs of overvaluation relative to fundamentals, despite measures aimed at restricting speculative demand. In contrast, many smaller cities have experienced oversupply as local governments promoted large-scale development to boost growth and used land sales to finance local government spending. Supply seems to have outpaced demand in many areas as evidenced by muted price increases and rising inventories. The commercial real estate market appears to be in oversupply in both smaller and bigger cities,” according to the latest IMF report on China.