Worldwide real estate prices may be closely synchronized, but a global real estate market hasn’t emerged, according to new research.
The Committee on the Global Financial System (CGFS), a group of central bankers that monitors the global financial system, published a report that found residential and commercial real estate prices increasingly move in tandem. It also found that international investors are playing a larger role in real estate.
Yet, a global property market hasn’t emerged. Instead, the report said, “There is still significant cross-country heterogeneity in price dynamics, which reflects differences in the strength of local drivers.”
“A key takeaway is that even if prices (both residential and commercial) have become more synchronized over the past decade, this doesn’t imply that we now have a global real estate market,” said Paul Hilbers, director of financial stability at the Netherlands Bank.
The report found that the increase in international investors has created new challenges for policymakers, however.
“International investors can affect property price dynamics both directly and through expectations of sustained future price growth, as underscored by the Canadian experience,” it said.
The growing importance of foreign buyers poses new challenges to domestic policymakers, “since foreign demand is less sensitive to macroprudential measures that affect the supply of domestic credit for property investments,” it said.
It concluded: “Because foreign investors rely relatively less on local funding than local investors, fiscal measures could be more effective in containing foreign activity than domestic credit measures.”