No global real estate market despite higher price synchronisation and growing role of international investors, central banks find

Press release  | 
18 February 2020

Although residential and commercial real estate prices are increasingly moving in sync and the role of international investors is growing, this does not mean that there is a global real estate market, a report by the Committee on the Global Financial System finds.

Property price dynamics: domestic and international drivers documents recent trends in residential and commercial property prices in over 20 countries, gives an overview of key drivers of price developments and describes policy initiatives used to manage associated risks to the economy and financial stability. 

Property prices have been rising, reaching record highs in many countries. As prices appear high in comparison to simple rule-of-thumb valuation benchmarks, such as rents and incomes, some central banks are concerned about the consequences of a potential correction. In many cases, however, current price developments can be largely explained by fundamental drivers such as interest rates and income, the report finds. 

"A key takeaway is that even if prices (both residential and commercial) have become more synchronised over the past decade, this doesn't imply that we now have a global real estate market," said Study Group Chair Paul Hilbers, Director of Financial Stability at the Netherlands Bank.

"Significant differences in cross country price dynamics reflect the strength of local drivers. Some drivers are more important in some countries than in others." 

A third highlight is evidence of the growing role of international investors in many markets. Policymakers have found they need alternative tools to deal with foreign buyers. These investors do not fund their purchases through local banks, so fiscal tools like higher stamp duties may be more effective than macroprudential policy. 

The CGFS is a central bank forum for the monitoring and analysis of broad financial system issues. It supports central banks in the fulfilment of their responsibilities for monetary and financial stability by contributing appropriate policy recommendations.