House prices are increasingly moving together, according to a new study from the International Monetary Fund (IMF). The research suggests that house prices around the world are showing a growing tendency to be influenced by one another, and behave more like stocks or bonds.
Researchers at the IMF looked at 44 cities and 40 advanced and emerging-market economies, and found that, increasingly, the growing integration of global financial markets is playing an important role in world property prices. The research comes from the IMF’s Global Financial Stability Report.
“Housing markets in one country are more sensitive to swings in another,” wrote IMF researchers Claudio Raddatz Kiefer and Jane Dokko on the IMF blog yesterday. "The heightened tendency for house prices to move in tandem may signal greater odds of an economic slowdown. An economic shock in one part of the world is more likely to affect housing markets elsewhere.”
The IMF research suggests that property prices are starting to behave more like the prices of traditional financial assets, like stocks and bonds. As wealthy individuals increasingly invest in property from New York to London, property prices come to resemble the global stock market: a fall in one market could have a domino effect around the world.
Moreover, like stock markets, global property markets become more and more sensitive to international economic forces. So a rise or fall in the stock market or commodity prices could equally impact the real estate in Tokyo or Los Angeles.