Housing Bubble
The International Monetary Fund (IMF) warned that various countries around the world should take immediate measures such as loan-to-value (LTV) ratio limitations in order to prevent the bursting of bubbles in their housing markets.
The Financial Times quoted the IMF as saying that a lot of governments are failing to control their housing markets, which have overheated to the point of threatening economic stability.
According to the IMF’s report published on June 11 (local time), international housing prices rose by 3.1 percent during the past year. The rise has been particularly conspicuous in emerging markets and the rate of increase has reached 10 percent, 9 percent, and 7 percent in the Philippines, China, and Brazil, respectively. Besides, the housing bubbles in Hong Kong and Israel are so severe that the markets could collapse in the event of an exit strategy of advanced economies.
Still, the IMF added that the price-to-income ratio and the price-to-rent ratio were 39.7 percent below and 3.5 percent higher than the long-term average. This means that Korea’s situation is different from the other countries with housing bubbles. In the United States, the ratios were 13.4 percent below and 2.6 percent over the respective long-term averages.
It is in Japan that houses can be bought at the lowest prices. The price-to-income and price-to-rent ratios in Japan are 41 percent and 38 percent less than the long-term averages.