House prices: bust or boom
In some countries house prices have continued to rise but in some countries they have dropped.
Most people assume that house prices will increase every year. It’s not that simple. To understand the real increase in house prices we have to take into account changes in the overall economy. If average house prices increased by 3% in a year and the rate of inflation is 1% for that year, then the real average increase in house prices is 2%.
Many factors affect the rise and fall of house prices. In the first three months of 2017:
- on average world house prices have continued to grow for 16 consecutive quarters
- but distinct patterns can be seen in different areas, the IMF identifies three very different clusters they label “gloom, bust and boom, and boom”
- idiosyncratic factors affect housing prices, for example in Turkey the influx of Syrian refugees means housing prices in cities near the border have risen faster than in the rest of the country
The International Monetary Fund (IMF), publishes a regular review of work housing prices.
Explore the IMF website, and then focus your attention on the House Prices Around the World graph.
Reflect on the questions below:
- In your region, do you believe real house prices moved the way the IMF has reported about your country in 2016?
- What might be some of the reasons why some housing markets went up and some went down?
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