The International Monetary Fund has said that the continuous hikes in interest rates by central banks around the world would cause serious property concerns.
The Washington-based lender stated this in a new report titled “Interest Rate Increases Volatile Markets, Signal Rising Financial Stability Risks.”
The report stated that the faltering property sector in many countries was raising concerns about risks that could broaden and spill over into banks and the macro-economy.
It further noted that risks to housing markets were growing because of rising mortgage rates and tightening lending standards, with many more potential borrowers now being squeezed out of markets.
According to the IMF, stretched housing valuations could adjust sharply in some market segments.
The report partly read, “Emerging markets are confronting a multitude of risks, including high external borrowing costs, stubbornly high inflation and volatile commodity markets. They also face heightened uncertainty about the global economy, and policy tightening in advanced economies.
“Strains are particularly severe in frontier markets, generally smaller developing economies where challenges are driven by a combination of tightening financial conditions, deteriorating fundamentals and high exposure to commodity price volatility.”
It noted that investors had so far continued to differentiate across emerging economies, and that while many frontier markets were at risk of sovereign default, many of the largest emerging markets were more resilient to external vulnerabilities to date.
“Having said that, after the stabilisation of outflows in the first half of the year, foreign investors are again pulling back,” the report stated.
