As the U.S. housing market booms, a parallel rise in residential real-estate prices across the world from Amsterdam to Auckland is raising fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating.
Policy makers were already worried about high property prices in parts of Europe, Asia and Canada before the pandemic, especially as years of low interest rates kept demand strong.
But now the trillions of dollars of stimulus deployed world-wide to fight the effects of Covid-19, along with changes in buying patterns as more people work from home, are turbocharging markets further.
That is putting policy makers in a bind. Many want to keep interest rates low to sustain the post-pandemic recovery, but they worry about people taking on too much debt to buy houses whose prices could stagnate or fall later. Other tools they have to cool demand, like tighter mortgage restrictions, aren’t always working, or are being postponed as authorities try to ensure broader economic growth stays on track.
The Danish central bank recently warned that cheap financing and savings that expanded during the pandemic could lead to people taking on more debt to purchase houses and property prices spiraling upward.