You are here: Home - News -

Stable global house price rises do not deserve tight fiscal policies – report

  • 18/08/2017
  • 0
Stable global house price rises do not deserve tight fiscal policies – report
House price moves around the globe do not justify a hawkish stance by major central banks in the world’s biggest economies, according to Oxford Economics.

The researchers believe evidence suggests that wealth effects on spending have faded, especially in the US and the UK.

Valuations only look stretched in a few Organisation of Economic Cooperation and Development (OECD) countries and instead, the report warned that the China market should be of greater concern.


3.5% growth

Last week, Oxford Economics predicted that UK house prices would remain sluggish until 2021, only rising about 1% during this time.

Its newly published GDP-weighted measure showed real global house price growth was running at around 3.5%, a “solid but not dramatic pace”.

Although it acknowledged there was much cross-country variation, researchers agreed rapid house price growth could justify tighter monetary policy if it foreshadowed stronger domestic spending, including via wealth effects.



However, they noted that these wealth effects may be weakening, especially in economies like the US and UK where mortgage equity withdrawal has historically underpinned spending but is now minimal.

They highlighted that policy makers also tended to fret about financial stability from potential house price crashes after excessive valuations, but argued that only New Zealand, Sweden and Canada seemed particularly over-valued at present. (see graph. Click to expand.)


Beware China

Instead, the researchers warned that China’s housing sector was more of a concern to the global economy.

“Booming real estate markets in China have underpinned the upturn in demand there over the last year or so but seem to be cooling now,” the report said.

“This could weigh on Chinese imports and global commodity prices, curbing the global cyclical upturn – and a look at past Chinese house price cycles suggests a risk that price growth could retreat quite sharply.

“This downside risk looks more significant to us than frothy housing markets in a few advanced economies, given China’s central role in generating the recent world upturn.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
  • RT @robjupp: Great day yesterday for donations to @MortSleepOut. With Gift Aid, we are now close to £17,000. It would be great to get to £2…

Read previous post:
Mortgage Solutions logo
Retention, subprime and the FCA all feature in this week’s top 10 most read – 18/08/17

Here's our roundup of the most read stories over the last five days with our Marketwatch on retention fees in...