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Real Time Insight

According to the IMF, housing prices are going through the roof in most countries and posing a threat to economic stability. The global house price index has been rising for seven quarters in a row and prices are now well above historical averages in a majority of countries, in relation to income and rents.

As many central banks have cut their interest rates to record low levels, home prices have been heating up.  According the IMF report--Era of Benign Neglect of House Price Booms is Over—“While a recovery in the housing market is surely a welcome development, we need to guard against another unsustainable boom. ….boom-bust patterns in house prices preceded more than two-thirds of the recent 50 systemic banking crises".

Some emerging markets have seen fastest appreciation with house prices up more than 10% in the Philippines, 9% in China and 7% in Brazil from a year ago.

In the US, house prices have been rising fast but are still not overvalued--at 13.4% below their long-run average relative to incomes, and 2.6% above their long-run average relative to rents but the IMF warned that "detecting over-valuation in housing markets is still more of an art than a science".

Do you think it is time central banks should start paying attention to rising housing prices and take actions to contain housing booms. Please join the discussion below.

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