July 2015

Globally, house prices continue a slow recovery. The Global House Price Index, an equally

weighted average of real house prices in nearly 60 countries, inched up slowly during the past

two years but has not yet returned to pre-crisis levels (Figure 1).1

Figure 1

1 The index is set to 100 in 2000. House prices are deflated by country CPIs in most cases.

2

As noted in previous quarterly reports, the overall index conceals divergent patterns: since

2007:Q3 house prices rose in a third of the countries included in the index and fell in the other

two-thirds (Figure 2). However, the picture may be changing: over the past year, real house

prices increased in two-thirds of the countries and fell in the other third (Figure 3).

Cumulative Real House Price Growth Since 2007:Q3

Figure 2

Real House Price Growth Over the Past Year

Figure 3

-100

-50

0

50

100

150

200

Ukra

ine

Latv

iaG

reece

Lithuania

Sp

ain

Irela

nd

Cro

atia

Bulg

aria

Russia

Hung

ary

Po

land

Slo

venia

Esto

nia

Cyp

rus

Neth

erland

sIc

ela

nd

Kaza

khsta

nItaly

Denm

ark

Slo

vak R

ep

ub

licP

ort

ug

al

United

Sta

tes

So

uth

Afr

ica

Fra

nce

Malta

Serb

iaC

zech R

ep

ub

licU

nited

Kin

gd

om

Ind

onesia

Jap

an

Ko

rea

Maced

onia

Mo

rocco

Fin

land

Belg

ium

Mexic

oN

ew

Zeala

nd

Thaila

nd

Sin

gap

ore

Germ

any

Luxem

bo

urg

Chin

aA

ustr

alia

Chile

Phili

pp

ines

No

rway

Canad

aU

nited

Ara

b E

mirate

sA

ustr

iaS

wed

en

Sw

itze

rland

Mala

ysia

Ind

iaIs

rael

Co

lom

bia

Taiw

an

Bra

zil

Ho

ng

Ko

ng

SA

RP

eru

Sources: Bank of International Settlements, Colliers International, European Central Bank, Federal Reserve Bank of Dallas, Savills, and national sources

-10

-5

0

5

10

15

20

Cyp

rus

Ru

ssia

Ch

ina

Slo

venia

La

tvia

Sin

ga

po

reItaly

Moro

cco

Fra

nce

Ja

pan

Gre

ece

Fin

land

Rom

ania

Vie

tnam

Ind

on

esia

Slo

vak R

epublic

Kazakhsta

nB

razil

Me

xic

oT

aiw

an

Au

str

iaK

ore

aC

roa

tia

Belg

ium

Tri

nid

ad a

nd T

obago

Neth

erlands

Spain

Portugal

Serb

iaS

witzerland

Mace

donia

Un

ite

d S

tate

sC

ze

ch

Re

pu

blic

So

uth

Afr

ica

Thailand

Ph

ilip

pin

es

Po

lan

dB

ulg

aria

Canada

Ge

rma

ny

Mala

ysia

Malta

Australia

Norw

ay

Isra

el

New

Zeala

nd

Denm

ark

Luxem

bourg

Hong K

ong S

AR

Chile

Lith

ua

nia

Hungary

Ice

lan

dIn

dia

Colo

mbia

Peru

United K

ingdom

Sw

eden

Turk

ey

Esto

nia

United A

rab E

mirate

sIre

land

Sources: Bank of International Settlements, Colliers International, European Central Bank, Federal Reserve Bank of Dallas, Savills, Sinyi Real Estate Planning and Research, and national sources.

3

A closer look at Figure 2 and 3 shows that many countries in which house prices had been falling

(such as Spain and the United Arab Emirates) have seen increases over the past year. Conversely,

some countries where prices had been rising rapidly (as Brazil, China and Peru) have seen

moderation in the rate of increase or a fall over the past year.2

As has been the case historically, house price growth and credit growth have gone hand-in-hand

over the past five years (Figure 4). Clearly, however, credit growth is not the only predictor for

the extent of house price growth; several other factors appear to be at play.

House Prices and Credit Growth

Figure 4

For OECD countries, house prices have grown faster than incomes and rents in almost half of the

countries (Figures 5 and 6). These house price-to income and house price-to-rent ratios are

highly correlated (Figure 7).

2 Two outliers, Qatar and Ukraine, were excluded from Figure 3 so changes in other countries could be seen clearly.

4

Figure 5

Figure 6

5

House Price-to-Income vs. House Price-to-Rent Ratio, OECD Countries

Figure 7

AUS

AUT

BEL

CAN

CZE

DNK

EST

FINFRA

DEU

GRC

HUN

IRLITA

JPN

KOR

LUX

NLD

NZL

NOR

PRT

SVK

SVN

ESP

SWE

CHEGBR

USA

70

80

90

100

110

120

130

70 80 90 100 110 120 130

pri

ce

-to

-in

co

me

ra

tio

Source: Organisation for Economic Co-operation and Development

.

price-to-rent ratio

This update was produced by Hites Ahir (IMF), Philippe Bracke (Bank of England), Ambrogio Cesa-

Bianchi (Bank of England), Prakash Loungani (IMF) and Alessandro Rebucci (Johns Hopkins University,

Carey Business School, Edward St. John Real Estate Program). Views expressed are those of the authors

and should not be ascribed to any of the institutions with which they are affiliated.

6