The Risks from Rising Real House Prices

This is a preview from the National Institute Economic Review, February 2019, no 247.

With the long expansion phase since the recession bringing the rise in indebtedness into focus, it is natural to consider how real house prices in the advanced economies have fared in the expansion. In this Box, prepared by NIESR’s Associate Research Director Barry Naisbitt, we show that, in real terms (i.e. after being deflated by a consumer price index) house prices globally are about 15 per cent higher since economic growth resumed. Figures from the Bank for International Settlements (BIS) show that real house prices in the advanced economies have increased by just over 20 per cent since 2011. Emerging economies, too, have seen house prices rise in real terms since 2011, but at about half the pace of that in the advanced economies.

"To the extent that the relatively high level of real house prices was a concern for financial stability before the recession, the increase in recent years should revive concerns. Compared to a decade ago, many central banks’ policy remits have been broadened to include financial stability concerns and macro-prudential policies now provide additional policy tools for central banks to adopt to act on potential housing market and debt issues."