London Home Prices Now Offer Clues for Buyers in New York, Tokyo

Home prices across the globe are increasingly moving in the same direction at the same time, according to a new International Monetary Fund analysis. Growing integration of financial markets is a key reason.

Researchers took a look at 44 cities and 40 advanced and emerging-market economies, and found that globally low interest rates have helped to push up prices the world over. What’s more, institutional investors have gotten more active in big-city real estate as they seek higher returns, and wealthy individuals are buying up properties as investments. Those two trends are inflating price stickers in places like New York and London simultaneously.

Coordinated economic growth has also helped home prices to move in tandem. In 2017, growth picked up in 120 economies -- the broadest synchronized jump since 2010.

“All of this suggests that house prices are starting to behave more like the prices of financial assets, such as stocks and bonds, which are influenced by investors elsewhere in the world,” IMF researchers Claudio Raddatz Kiefer and Jane Dokko wrote in a blog post Tuesday, based on analysis in the fund’s Global Financial Stability Report. But there’s a difference: homes are most families’ biggest asset, and 2007-2008 showed us just how much they can tank an economy. As a result, there’s a policy need to protect against big, synchronized price swings, according to the researchers.