IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The 1985-94 global real estate cycle : its casues and consequences

Listed author(s):
  • Renaud, Bertrand
Registered author(s):

    The peak of the first global real estate boom was reached around 1990 in most Organization for Economic Cooperation and Development (OECD) countries. Asset inflation was massive: in office markets across Europe, capital values rose 400 percent between 1980 and 1990, accelerating after 1986 - while average consumer price inflation went up only 150 percent. Property values have declined sharply since 1990, with most property markets losing at least 20 percent in nominal terms the first year of the crash's onset. Cumulative drops in capital value often reached 50 percent by the end of 1993. This pattern of a sustained buildup, usually peaking in 1990, followed by a sharp fall in nominal values, has been encountered in most OECD markets and in several NIE countries. Real estate booms and busts are recurring events, says the author, but real estate volatility on the scale and with the intensity just experience is costly and destructive. Real resources are misallocated, and the impact on the banking system, on households, and on the economy can be lasting. The author surveys the global real estate cycle of 1985-94, trying to identify domestic and international factors that triggered this new phenomenon of global real estate volatility. The authors intent: Assuming that the globalization of financial markets is irreversible, can we separate unique factors from recurring ones in this first global cycle? Can we map generic policy lessons and identify policy priorities and research agendas? Can we identify factors that accentuate real estate price and investment volatility? Four domestic factors lay behind the unusual volatility of this first global cycle, says the author: the liberalization and deregulation of capital markets, a distorted incentive structure that often stimulated the use of debt, new macroeconomic tools and occasional policy errors, and the structure of the real estate sector itself. The wide-ranging survey includes a proposal for research in certain areas, and offers some diagnosis. For example: If the global real estate crash has publicized one thing, it is the poor quality of information on real estate markets.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1452.

    in new window

    Date of creation: 31 May 1995
    Handle: RePEc:wbk:wbrwps:1452
    Contact details of provider: Postal:
    1818 H Street, N.W., Washington, DC 20433

    Phone: (202) 477-1234
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1452. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.