No abstract

The last decade has been marked by cycles of excessive boom and bust in the housing market. However, not all countries have experienced high volatility in their house prices. Indeed, Germany has been unique in retaining flat price levels over the whole period and failing to respond to any of the macroeconomic shocks. The main reason for this stability can be found in real estate finance and in the existence of a sophisticated rental market. While in other countries monetary stimuli are effectively transmitted to the real economy via the housing market, the German insistence on prudential lending isolates the housing market from financial market distortions. By demanding high deposits, aligning lending to the mortgage lending value instead of the market value and by offering predominantly fixed-rate mortgages, banks reduce the risk of defaults and thus contribute to stability in the market. This system has evolved as a result not of regulations but of a sophisticated rental market which enables households to save their own funds for house purchases. This, in turn, explains the preference for fixed-rate mortgages.

No abstract

Due to globalisation and monetary integration the macroeconomic conditions for industrial countries have become more and more equally.Based on a factor analysis we examine if the synchronisation of business cycles also affected the co-movement of house prices in OECD-countries for the period of 1990 to 2010. As it turns out, the integration of housing markets has accelerated in the last decade. We can identify a strong global factor as well as a regional factor. However, some countries like Germany, the Netherlands and Japan seem to be uncoupled from the global trend.Furthermore, the co-movement of markets with greater proximity is generally stronger. Although globalisation seems to foster the integration of housing markets, monetary integration has only a minor effect. We illustrate our results by referring to methods well-known from cluster-analysis.