As part of globalization at large, domestic real estate and related mortgage markets experienced strong growth in international linkages. Financial innovations such as the rapid rise in the securitization of mortgage backed securities in the United States fueled this globalization process and contributed to the international tradability of what was once a local asset which turned into a global asset class. The ensuing Global Financial Crisis put real estate markets squarely at the center of research in macroeconomics and international finance. Today, global investors play a key role in the real estate markets of important urban hubs like Sydney, London and New York, but also second-tier cities such as Vancouver, possibly leading to increased global synchronization of real estate prices.
The increased international linkages between real estate markets imply immediate repercussions for domestic financial markets, households and policy makers. For instance, capital inflows into domestic real estate markets not only change the spatial and social structure of urban societies, but also can undermine financial stability due to excessive price developments. Research by leading scholars established a close association between excessive price developments in real estate markets and financial crises. Given that real estate constitutes the largest share of wealth in households’ portfolios, variations in real estate valuations have direct implications for inequality and social cohesion.
The Research Network provides a platform to intensify research on the drivers and consequences of the globalization of real estate markets.