• The majority of countries in the IMF's Global House Price Index saw a rise in house prices over the pandemic.
  • Low interest rates and high demand are just a couple of reasons why house prices have risen.
  • This increase in house prices has made housing unaffordable for many segments in Europe.

While most economic indicators deteriorated last year, house prices largely shrugged off the effects of the pandemic. Of the over 60 countries that enter into the IMF’s Global House Price Index, three-quarters saw increases in house prices during 2020, and this trend has largely continued in countries with more recent data.

House prices rose by more than 5% in 23 countries out of the 60 countries in the IMF's Global House Price Index for 2020.
Changes in House price around the world.
Image: Bank for International Settlements and World Economic Outlook

IMF research indicates that low interest rates contributed to the boom in house prices, as did policy support provided by governments and workers’ greater need to be able to work from home. In many countries, including the United States, online searches for homes reached record levels. Along with these demand factors, house prices also increased as supply chain disruptions raised the costs of several inputs into the construction process.

health and healthcare, COVID

How has the Forum navigated the global response to COVID-19?

One year on: we look back at how the Forum’s networks have navigated the global response to COVID-19.

Using a multistakeholder approach, the Forum and its partners through its COVID Action Platform have provided countless solutions to navigate the COVID-19 pandemic worldwide, protecting lives and livelihoods.

Throughout 2020, along with launching its COVID Action Platform, the Forum and its Partners launched more than 40 initiatives in response to the pandemic.

The work continues. As one example, the COVID Response Alliance for Social Entrepreneurs is supporting 90,000 social entrepreneurs, with an impact on 1.4 billion people, working to serve the needs of excluded, marginalized and vulnerable groups in more than 190 countries.

Read more about the COVID-19 Tools Accelerator, our support of GAVI, the Vaccine Alliance, the Coalition for Epidemics Preparedness and Innovations (CEPI), and the COVAX initiative and innovative approaches to solve the pandemic, like our Common Trust Network – aiming to help roll out a “digital passport” in our Impact Story.

While fundamentals of demand and supply can account for much of the buoyancy of housing markets during the pandemic, policymakers are nonetheless keeping a close watch on developments in this sector. The increases in house prices relative to incomes makes housing unaffordable to many segments of the population, as highlighted in the IMF’s recent study of housing affordability in Europe. The post-pandemic working arrangements could also exacerbate inequality concerns as high-earners in tele-workable jobs bid for larger homes, making homes less affordable for less affluent residents. The surge in house prices has also had an impact on headline inflation in some countries and could contribute to more persistent inflationary pressures.

Over a decade ago, a turnaround in house prices marked the onset of the Global Financial Crisis. However, the twin booms in household credit and house prices in many countries before that crisis—and many previous housing crashes—appear less prevalent today. Hence, in a plausible scenario, a rise in interest rates, a withdrawal of policy support as economies start to recover, and a restoration of the timely supply of building materials, could lead to some normalization in house prices.