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House prices: bust or boom

Review the economic significance of the property industry and the real factors impacting the rise and fall of real estate investment value.
Outline of a house on a chart with an arrow indicating an increase
© Deakin University
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”
  • 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.

Your task

Explore the IMF website, and then focus your attention on the House Prices Around the World graph.
Review your region and explain whether you believe real house prices moved the way the IMF reported in your country in 2017. In your response include at least on reason as to why some housing markets increased, while others decreased.
© Deakin University
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What Influences Property Values?

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