Philippe Bracke and Silvana Tenreyro.
When someone bought a house turns out to be an important factor in predicting whether the house will be sold again soon, and at what price. People who bought during a boom aim at achieving higher prices when they sell and, as a consequence, move less often. We explore whether this pattern is due to psychological anchoring (whereby the previous purchase price becomes an important reference point) or to the way the mortgage market works (for example, with homebuyers often using proceeds from house sales for down-payments on new properties).
Philip Bunn and Alice Pugh
“UK prepares for pensions spending spree” “House prices set to soar by 30 per cent as savers raid pension funds” These were some of the headlines which followed the pension reforms announced by the UK government in the 2014 and 2015 Budgets. But how much truth do they contain? In contrast to some of the headlines, results from a household survey commissioned by the Bank suggest that greater pension freedom will have only a small impact on household spending. And – although a number households would like to invest funds withdrawn from their pension in property – only a subset of these are likely to be able to afford to do so, and some may have bought property even without the reforms.
Ambrogio Cesa-Bianchi and Alessandro Rebucci
In some parts of the emerging world, housing markets have grown well ahead of income in recent years. Will a US monetary policy normalisation bring about a correction in house prices as the search for yield unwinds and capital flows back to the US? Looking at the past through the prism of a structural VAR, we think the answer is “yes it will”. Shocks to global liquidity have much larger effects on house prices in emerging markets than in advanced world economies. A tightening in global liquidity conditions also leads to a rapid capital account reversal, exchange rate depreciation and hence a sharp fall in consumption.