New Delhi: Rising real estate prices in Asia are a short-term trend and will cool down in the longer term as the industry will be able to meet the demand supply mismatch in the next few years, a top IMF official said on 31 May 2007.
“In the long-run, housing supply can expand to meet the rise in demand. Over shorter periods, however, demand can spurt ahead of supply, sending prices soaring,” International Monetary Fund (IMF) senior resident representative, Joshua Felman, said here at a Ficci seminar.
Citing the example of the United States where housing prices have increased by just 0.4% per annum in real terms for the last hundred years, Felman said that same is true for most of the nations around the world.
“There is no evidence that the price rise is out of proportion in the long-term though the present market is led by speculation mainly because of the demand-supply mismatch,” he said.
He, however, said that people consider housing as good investment because it provides services to them apart from promising some secure return.
Talking about the fiscal measures taken by some countries for checking housing prices, he said that some central banks think such steps are necessary because the burst of asset prices bubble can be painful, while some other central banks term such monetary measures as “blunt” steps.
Felman said both the attitudes were wrong and governments should better focus on filling the demand-supply mismatch by making houses available at affordable prices.