The Global House Price Boom Could Haunt The Recovery From Covid-19

The year of the pandemic saw the largest increase in global house prices since the U.S. housing boom of the mid-2000s. And there is no sign the rally is coming to an end.

That provides immediate economic support for the global recovery from Covid-19. But a prolonged house price upswing would mean big new problems for both financial stability. And it could result in economic strife if middle-class citizens accustomed to a one-way housing bet suddenly find the rug pulled out from beneath them down the line.

House prices rose by 4.91% across 16 economies monitored by the Federal Reserve Bank of Dallas last year, the sharpest increase since 2006. The move was large by the standards of a normal year—but explosive in the context of a global economic contraction of around 3.3%.

And the trend shows little sign of abating. The U.S. housing market is millions of homes short of buyer demand. Prices have climbed in places as varied as the eurozone, South Korea, Australia, New Zealand and Canada.

Booming prices reflect a major difference between the liftoff from the financial crisis of 2008 and the nascent post-pandemic boom. The financial crisis emanated from a fragile, undercapitalized banking sector: The obvious postcrisis response was to lend much more conservatively. But at the beginning of last year, banks were far less overextended and, with greater government support, were much more rapidly able to pass on interest rate cuts to borrowers.

At the same time, banks are far more exposed to housing markets than they once were. Across 18 advanced economies, mortgage lending has grown from around a third of total bank lending in 1960 to very nearly 60%. The financial crisis seems to have only been a brief speed bump in this secular trend.

The experience of countries that didn’t have a major banking crisis in 2008 shows what could happen on a far larger scale now. Most countries with large run-ups in household debt during the last decade—China, South Korea, Thailand, Canada and Sweden—were places where banks didn’t suffer in 2008. And rather than the brief, one-off increase in leverage of the kind many analysts expect following the pandemic today, household borrowing climbed continually over the following decade.

Many such countries have attempted to slow down rapid increases in house prices. The Korean government has enacted dozens of individual tweaks to tax and lending regulations. The latest Canadian federal budget announced a tax on vacant and underused property owned by foreigners, following existing levies in Vancouver and Toronto. So far, few measures have had an impact large enough to stall the boom.

Earlier this year, Swedish central bank governor Stefan Ingves compared the household debt situation to sitting on a volcano. The analogy is apt, given how sensitive the health of economies is to increased leverage among households in particular. Economists Atif Mian, Amir Sufi and Emil Verner have published research demonstrating that burgeoning household debt tends to slow down economic growth.

That’s not to say there’s nothing to be done. There have been a small number of successes in controlling and preventing house price booms to note. They bear much closer examination for policy makers in the rest of the world.

Japan’s case is the most obvious. The country’s lack of zoning restrictions and rent controls are regularly credited with the country’s flat home prices, particularly in Tokyo where the total population is still increasing. All the same, making fair international comparisons is difficult because interest rates have been so much lower than other parts of the world for so much longer, and overall economic growth has been so weak.

According to a study published in the Journal of Housing Economics in 2018, Singapore’s flurry of efforts to cool house prices between 2009 and 2013 also seems to have helped to stall the country’s buoyant house price growth. The measures included higher taxes on home-flipping, higher deposit requirements for second-time buyers, longer residential loan terms, and caps on the amount of a borrower’s income that could be spent on home loan repayments. But Singapore is also an example of how difficult such progress is to defend: Prices jumped to a new record in the first quarter of the year. And Singapore’s market is unique in other respects—the lion’s share of housing is publicly developed for Singaporeans to purchase, and homeownership rates are among the highest in the world.

There are other areas to look at. Outright taxes on the value of houses, the land beneath them, or both are popular with economists but have yet to find their way into public policy in most parts of the world. Even without such radical steps, fixing other positive biases housing receives in tax systems around the world would be a good start.

Dealing with an asset that is a totemic symbol of middle-class security and the main source of household wealth but is also a major financial stability risk is an unenviable task for policy makers.

But with many parts of the world already in the foothills of a new house price boom, it’s an issue that must be considered urgently if they want to avoid the mistakes of the past.

Greenwich, Connecticut, is in New England (just barely), but that doesn’t mean it’s a quaint, sleepy small town with covered bridges and white churches on the green.

It’s leafy, certainly, but it’s also a luxury-minded power centre close to New York City, with many celebrity residents (director Ron Howard, singer Diana Ross, actor Meryl Streep and, at one time, Australia’s own Mel Gibson).

The main shopping street, Greenwich Avenue, is home to brand stores such as Hermès, Kate Spade, Saks Fifth Avenue, and Tiffany & Co.

And Greenwich, particularly in the “back country” north of the Merritt Parkway, is host to some of the most exclusive real estate in the world.

The average price for a single-family home in the second quarter of 2025 was USD $3.25 million (AUD $4.9 million). But that’s merely an entry point, buying a smaller home in one of the town’s less desirable neighbourhoods.

What does USD $43 million (AUD $66 million) buy in Greenwich?

Last autumn’s most expensive listing offered a 1,068-square-metre waterfront home with eight bedrooms and 11 bathrooms, plus “Gatsby-like lawns”, a gym, games room, party room, wine cellar, fruit orchard, pool and spa. The front and side porches have heated floors.

Prefer something more traditional and secluded? For USD $33 million (AUD $50 million), buyers could close on an 11,760-square-metre Georgian manor on 3.2 hectares, featuring eight fireplaces, an elevator, and a dumbwaiter.

The first floor features a three-storey cascading chandelier. For bibliophiles, there’s a two-storey mahogany library. If bocce is more your pace, a similar USD $25 million compound on 7.5 hectares, built for a liquor magnate in 2009, may appeal. Fourteen bathrooms should suffice.

The Greenwich market is strong, but not without challenges.

“The big problem is that there’s no inventory,” said Evangela Brock, an agent with Douglas Elliman. “It’s extremely low at all price points.”

In November, just 15 properties under USD $1 million (AUD $1.52 million) were listed without contracts, compared with 23 above USD $10 million (AUD $15.2 million). Of those, six had contracts pending. Greenwich has more than 17,000 single-family homes.

Kanebridge Quarterly toured two mid-priced houses in Greenwich. “You don’t lose money in Greenwich real estate,” said Beth MacGillivray, a realtor with the Higgins Group. “This is the hot spot.”

MacGillivray opened the door to a 733.9-square-metre Georgian colonial in the Sherwood Farms Association development her family built in 2005. The house was expected to sell for about USD $5 million (AUD $7,743,535).

The six-bedroom, four-level house is move-in ready, with staged furniture showing its potential and many of the amenities that buyers in this range expect.

Visitors enter through a two-storey foyer with a marble floor. A circular staircase leads to an airy living room with double-height ceilings.

There’s a main bedroom with his-and-hers bathrooms, a cherry-panelled library with cigar-smoke venting, five fireplaces, and a state-of-the-art kitchen with a breakfast nook by Greenwich-based designer Christopher Peacock.

Most rooms have huge walk-in wardrobes. Even the laundry room has granite countertops. Custom millwork, cabinetry and fixtures are evident throughout.

The drawbacks? A smaller yard and no pool. Still, refugees from the city would marvel at the abundant interior space.

Not far away, an entirely different house was on the market for USD $2.66 million.

The imposing 696.7-square-metre, nine-bedroom, seven-bath Georgian/Federal home on Shady Lane in the Glenville neighbourhood was built in 1900. Its good bones and inherent grandeur were apparent, as was a clear need for updating.

“It’s a good project for someone,” said realtor Kaori Higgins. “It needs the right buyer, someone who is looking to return it to its stately original condition.”

Given the hot market, some buyers may be tempted to tear it down and build anew.

But the house is filled with charming period details, including hand-built stone fireplaces, reading nooks, pocket doors, leaded windows and beautiful original millwork.

The second floor offers a vast veranda with views of Long Island Sound and a built-in swimming pool.

The drawbacks? Bathrooms that were awkwardly redesigned in the 1970s, unsightly flooring on the upper levels, and crumbling exterior elements.

Higgins noted that a nearby sister property, fully renovated, sold for USD $11 million (AUD $17 million). Any buyer of Shady Lane’s faded elegance would need both imagination and deep pockets.

For contrast, Kanebridge Quarterly left Greenwich for nearby Fairfield’s upscale Greenfield Hill neighbourhood to visit Lion’s Gate, a 595 square metre Tudor Revival home built as a modest dwelling in the 1920s but extensively expanded and remodelled in 2000.

With three acres of land, a guest cottage, an artist’s studio and a pool house, the asking price is USD $3.3 million (AUD $5 million). Like the Sherwood home, Lion’s Gate is flawlessly move-in ready, with designer touches throughout.

The entire second floor was added during the renovation and features parquet flooring, a massive main suite, arched doorways and 2.74-metre ceilings.

Many rooms include walk-in wardrobes, extensive carved millwork and built-ins. The wood-panelled library (on the site of the former stable) is warm and inviting.

The expansive kitchen includes a window seat with a hand-painted ceiling, a wine cooler and a butler’s pantry.

Realtor Lorelei Atwood said Fairfield faces the same inventory shortage as Greenwich.

“Demand is growing as more New York-based executives are being told they have to report to the office,” she said. “Fairfield has always been a commuter town.”

Why is this home USD $3.3 million (AUD $5 million), and the Sherwood property around USD $5 million (AUD $7,743,535)?

Location. Greenfield Hill is lovely, but Greenwich real estate occupies a rarefied class of its own.

Note: Thanks to realtor Sherri Steeneck for chaperoning.

This story appeared in the Autumn issue of Kanebridge Quarterly, which you can buy here.

The Global House Price Boom Could Haunt The Recovery From Covid-19

Decreasing affordability raises both financial and political risks.

A haven for hedge-fund titans and Hollywood grandees, Greenwich is one of the world’s most expensive residential enclaves, where eye-watering prices meet unapologetic grandeur.