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Housing bubble 2.0

LiveMint logoLiveMint 12-06-2014 Livemint

The financial crisis that rocked the world economy a few summers ago began with tremors in overvalued real estate markets in several large economies.

A senior official at the International Monetary Fund has now warned that housing prices are once again frothy. Policymakers who have flooded the world with cheap money in a bid to prevent an economic collapse after September 2008 need to act soon if we are to avoid a tragic repeat of the previous housing market crash.

The latest data from the multilateral lender show housing prices are above historical averages in many countries. India is an exception, with housing prices in the last quarter of 2013 around a tenth less than the levels in the same three months of the previous year—though a local housing price index developed by the National Housing Bank shows that prices are decelerating, not declining. Anyway, the global data is worrisome.

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