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The International Monetary Fund’s Global House Price Index, which tracks real housing prices in 57 countries, has reached close to the levels seen before the global financial crisis last decade. However, according to economists at the IMF, it’s not reason for panic because of at least two reasons.
First, the pick-up in housing prices is not uniform across countries as it was in the boom of the 2000s. Second, countries are now using macroprudential policies more actively to contain the boom.
Even though housing prices are rising at a much slower pace than in the 2000s, authorities in different countries would do well to be cautious, as in the environment of near zero interest rates—prevalent in most parts of the developed world—a pick-up in economic activity can have a disproportionate impact on asset prices, including housing.
Furthermore, global central banks lack policy space to deal with major stress in the housing market or financial system at the moment.