IMF warns of global housing crash and urges UK to build more houses

Launching its new Global Housing Watch website, the IMF revealed data showing that global housing prices have risen for seven consecutive quarters and are well above their historical average in many countries.

In a speech to the Bundesbank, IMF deputy managing director Min Zhu spoke of the importance of monitoring global housing data and warned of the need to guard against unsustainable growth in housing markets.  "IMF research shows that of the nearly 50 systemic banking crises in recent decades, more than two thirds were preceded by boom-bust patterns in house prices", said Zhu. "It is crucial to keep an eye on current housing market developments to keep them from going through another boom-bust cycle."

Zhu recommended policy measures such as limiting loan-to-value ratios and debt-to-income ratios and the raising of interest rates in order to cool global housing markets, but indicated that country-specific factors meant that "policy response cannot be 'one-size fits all'".

The global warning came after the IMF urged the UK government to build more houses to prevent a house price bubble.

In its annual report on the economic conditions in the UK, the IMF identified "inadequate housing supply, associated with planning restrictions" as a fundamental issue behind rising house prices. The report recommended the loosening of "unnecessary constraints on brownfield and greenfield developments" as a potential remedy.

The report acknowledged the role of the Government's Help To Buy scheme in making mortgage credit available to buyers, but warned that the scheme may need to be closed early if it results in a rise in high loan-to-value mortgage transactions.