Bloomberg "Rising House Prices Pose Dilemma for Central Banks Worldwide"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Bloomberg reported on the 11th (local time) that soaring housing prices have put central banks around the world in a dilemma.

According to the report, Bloomberg pointed out that in a situation where memories of financial crises caused by real estate bubbles remain, the recent rapid rise in housing prices is an issue that central banks around the world cannot ignore.

The Bank for International Settlements (BIS) warned in its annual report last month that housing prices have risen excessively compared to the economic fundamentals during the COVID-19 period, and that if capital costs increase, vulnerabilities in the real estate sector could expand.

Federal Reserve (Fed) officials explained that the Fed's agreement last month at the Federal Open Market Committee (FOMC) to effectively begin discussions on tapering (reducing asset purchases) was influenced by the soaring housing prices.

Central banks of New Zealand, Korea, and Canada are under pressure to take measures to stabilize sharply rising housing prices at their policy decision meetings this week, and the European Central Bank (ECB), Bank of England (BOE), and Norges Bank are in similar situations.

However, Bloomberg pointed out that actively pursuing policy measures to curb housing prices is not easy under the current circumstances.

There is a coexistence of concerns that if stimulus measures are withdrawn too late, housing prices may rise further, worsening financial stability, whereas if stimulus measures are ended too abruptly, it could cause market instability and dampen the economic recovery.

Bloomberg introduced that many countries are still fighting COVID-19, so macroprudential policies such as adjusting loan-to-value ratios on mortgages could be considered as alternatives, but there are concerns that the success of such policies cannot be guaranteed.

While there is hope that the end of tax benefits will lead to a decline in real estate prices, as seen in the UK where housing prices fell last month for the first time in five months, Bloomberg also reported that in countries like the United States, where demand increases due to the expansion of remote work are driving housing price rises, such expectations are difficult to hold.

This content was produced with the assistance of AI translation services.