London home prices now offer clues for buyers in New York & Tokyo

  • August 28, 2018

London home prices now offer clues for buyers in New York & Tokyo

If the price of my apartment in Tokyo rises, will my London home also go up? The latest research by the International Monetary Fund (IMF) answers all these questions that preoccupy real estate investors with an international asset portfolio.

Home prices across the globe are increasingly moving in the same direction at the same time, according to the new IMF analysis. As a result, your home in London will most likely increase in price too.

In recent years, we have witnessed house prices in different parts of the world mimicking each other. Economic shocks in one country have proven to be very influential across all real estate markets. IMF’s report maps out the reasons for this synchronisation.

The report examined 44 cities and 40 advanced and emerging-market economies to identify real estate trends on a global scale. The researchers have concluded that the growing integration between financial markets has caused house prices across countries and cities to move in tandem.

For example, 2017 was the year with the broadest synchronized jump in growth since 2010. London and New York have been traditionally the cities that attract institutional investors who seek big deals and high returns. As a result, upmarket real estate deals and investments have been inflating prices in both cities at the same time.

In addition, the report emphasises the significant role of interest rates in creating house price coordination across different markets. In recent years, massive economic growth has been induced by the low-interest rates and cheap mortgages that simplify real estate deals. This has only led to a push-up in prices. Nevertheless, private equity firms and real estate investment trusts, active in the major financial centres of the world, such as London further reinforce price growth.