The IMF has just released a report which admonishes world governments to proactively work to contain the rapid price rises in the housing market, which the IMF says could lead to another devastating crisis. The IMF says that global real estate prices are far above their average in many countries and the organisation believes this poses a major threat to the world economy. The IMF says prices are way out of line compared to their long-term relationship with incomes and rents, and the report specifically cited the Philippines, Sweden, the UK, Canada, Australia, Hong Kong, and Belgium as overpriced markets. The organisation encouraged countries to push ahead with reforms like high stamp duties, caps on mortgage size, and high capital requirements for banks making risky loans. Despite these measures being new and somewhat experimental, the IMF said that governments needed to embrace them fully rather than continuing with an approach of “benign neglect”.
FINSUM: This is a thorough and shocking report of the lofty global real estate market. Prices must be kept in check or another downturn may yet bring the global economy to its knees.