Global House Prices Still Showing Down Trend

Prices still falling in roughly half of 54 countries tracked around world

Brazil, Germany among countries seeing house prices rise

Within United States, housing picture varies considerably

Price trends vary widely between countries, with Ireland, Greece, Portugal, and Spain seeing the biggest falls in the past year and Brazil and Germany, substantial increases.

While overall the trend is mixed, there is no sign of an uptick in the global index of house prices, a weighted average of prices in 54 countries, according to our research. The index remained level during the second quarter of 2012—the latest quarter for which consistent data is available for a large group of countries—and the GDP-weighted index continued to decline (see Chart 1).

Global housing boom-bust

Our research, published in a new IMF Working Paper, documents the magnitude and characteristics of the global housing boom-bust and examines the impact of house price corrections on the overall economy. The analysis was conducted based on an international sample covering both developed and developing countries.

We found that price trends vary widely between countries, with Ireland, Greece, Portugal, and Spain seeing the biggest falls in the past year and Brazil and Germany, substantial increases (see Chart 2).

The findings suggest that long-run price dynamics are mostly driven by local factors such as income and population growth. The effect of more globally connected factors such as interest rates appears to be less strong.

IMF staff reports listed below include an assessment of conditions in individual countries’ housing markets.

Germany Staff report, Article IV (p.8)

Ireland Staff report, Article IV (pp. 6, 7)

Lebanon Staff report, Article IV (p.8)

Norway Staff report, Article IV (pp.12–14)

Philippines Staff report, Article IV (p.28)

Singapore Staff report, Article IV (p.41

Sweden Staff report, Article IV (p.27)

United Arab Emirates Staff report, Article IV (p.6)

United States Staff report, Article IV (p.51)

Credit market conditions can have an impact in the short run and, ultimately, when the correction starts, affect both financial stability and the overall economy.

Driving factors

Our econometric model of the determinants of house prices explains house price growth based on several short-run factors, such as growth in incomes, asset prices, and population, and long-run-factors, such as the ratio of house prices to incomes.

The difference between actual house...