House prices in Australia, Belgium and France have declined recently while the rise in Canadian, Norwegian and Swedish home prices has moderated, according to data from the Bank for International Settlements (BIS) that can be used as an early warning indicator for financial instability.
Encouraged by the Group of 20 finance ministers and central bank governors, BIS has expanded its collection of data on comparable monthly residential property prices to span 55 countries to help policymakers and economists identify whether house prices are sustainable or whether they are exceeding historical averages.
"Leverage-fuelled housing booms that turn into busts have often been at the very heart of episodes of systemic stress," BIS wrote in its latest quarterly review that includes an article on how the residential price data are collected and can be used.
"Historical experience has demonstrated that the interactions between rapidly growing house prices and excessive credit expansion are a tell-tale sign of the build-up of vulnerabilities in the household sector and the source of future losses for banks," adds BIS in a reference to earlier work partly by Claudio Borio, the head of its monetary and economic department.
BIS started publishing monthly residential property prices in July 2010 and now publishes over 300 data series as there are several countries that cover sections of the market, such as new or existing dwellings, along with data that cover the entire market.
One of BIS' observations is that house prices have recently displayed greater diversity across countries than in the recent aftermath of the crises when they all fell.
While property prices, deflated by inflation, rose by 9.5 percent in the United States and 6 percent in the United Kingdom, they remain in negative territory in Japan (down by 2.6 percent) and were generally weak or negative in Continental Europe and have continued to fall in the southern part of Europe, such as Italy, Spain, Portugal and Greece.
House prices in emerging regions outside Europe have generally increased, with prices in China, for example, up by an annual 13 percent in the first quarter of 2014 while prices growth in Latin America were more moderate.
Please click on www.bis.org to read the BIS September quarterly review.