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The Need to Improve Global Real Estate Data

Brian Sturgess - September 2013

Real estate is an asset that is talked about far more than it is analysed. The cause of media interest is obvious. Property represents the major portion of household wealth in most countries and real estate is a significant proportion of total corporate assets. It is also an asset frequently used as collateral for other personal and corporate transactions so there important interconnections between the value of property and the demand for credit in an economy. The macroeconomic importance of studying property cycles in terms of the causes of asset bubbles, economic booms, financial crashes and the business cycle has attracted many country focused studies of the economics of the sector, but no general theories. Until recently, the dynamics of property prices and the timing of booms and busts differed considerably between sectors (residential, commercial, retail, industrial, etc.) and between regions and across countries. There is evidence now, however, of increasing globalisation in real estate markets. Barkham (2013) has noted the first decade of the twenty first century saw the first co-ordinated global boom and bust in this asset class. 

The important, albeit complex, relationships that exist between property prices and the level of nominal aggregate demand in an economy makes monitoring property prices an important barometer for monetary authorities. Not only is real estate spending an important part of investment, but the value of property holdings influences consumer spending through real wealth effects. Indeed a recent useful contribution by Drehmann et al (2012) has suggested that combining property prices with credit information provides the best means of explaining financial cycles and p...

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