An Investigation of the Synchronization in Global House Prices

We review the main studies on house price synchronization and conduct an empirical analysis using OECD house price indices. We provide a discussion of the contributing factors of synchronization, with a focus on the demand and supply dimensions. Synchronization across both countries and cities is examined. We report that housing markets globally have become more synchronized, this being particularly clear for cities. Sustained demand for places that are attractive for financial motives but also for lifestyle and sometimes climate, combined with the concurrent fact that such places tend also to be supply-constrained, is likely to lead to more synchronization across markets. The conclusions are important for investors seeking to diversify their housing holdings internationally. The discussion also has policy implications.