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PHOTO: New Zealand house prices are the real pandemic

House prices are booming in almost every major economy in the wake of the coronavirus pandemic, forging the broadest rally for more than two decades and reviving economists’ concerns over potential threats to financial stability.

Of the 40 countries covered by OECD data, just three experienced real-terms house price falls in the first three months of this year — the smallest proportion since the data series began in 2000, analysis by the Financial Times found.

Historically low interest rates, savings accumulated during lockdowns and a desire for more space as people work from home are all fuelling the trend, analysts said. In the short term, house price growth can be “a good thing for the economy because people who already own homes feel richer and they can spend more due to the valuation of their assets”, said Claudio Borio, head of the monetary and economic department at the Bank for International Settlements, the bank for central banks. However, if it persists it could turn into an unsustainable boom that could eventually push activity “into reverse”, particularly when accompanied by strong credit expansion, he warned.

Strong growth persisted in the UK, South Korea, New Zealand, Canada and Turkey, among others.