Currencies may be a peg to one another, but do home prices also have symbiotic relationships?
Home prices worldwide may be synchronized
Perhaps more so than one would think. A recent International Monetary Fund (IMF) report has shown that property prices may be linked across the globe. 20 years ago, property price movements worldwide showed only a 10% dependency on global factors. Now the level of interdependency is at 30%.
The report showed that home prices in major cities outside of the United States are closely linked to the US housing prices. The major cities mentioned in the report include Beijing, Dublin, Hong Kong, London, Seoul, Shanghai, Singapore, Tokyo, Toronto, and Vancouver.
The higher correlation of housing prices across these cities could be due to the increasing frequency and ease of movement of global elites. Investment and asset managers have been known to allocate an average of 11% of their portfolios to property.
New York housing prices skyrocketing
As capital flows more easily between global markets, the ability of domestic governance in controlling interest rates and local policies might become less potent. Global liquidity may make it more difficult to prick local property bubbles.
Investors are looking more closely at US interest rates though the 6 times hikes have yet to truly change the situation in major global markets.
Home prices in New York have been rising continually. And economists are warning of possible trouble ahead as real estate markets make co-ordinated movements up the pricing ladder. They recommend looking closely at real estate agencies’ reports in major cities such as New York, London, and Hong Kong.