The 1985 to 1994 Global Real Estate Cycle: An Overview

The globalization of financial markets is affecting real estate markets. During the period 1985 to 1994, a large number of countries experienced strong real estate booms that peaked around 1989 followed by severe asset price deflation and an output contraction that usually lasted until 1994. Global finance appears irreversible. Should we also expect the recurrence of real estate cycles of strong amplitude? Or does this first global cycle represent a one-time adjustment to global integration happening in many countries simultaneously? To facilitate further comparative analyses, this article inventories the international and domestic factors, in their macroeconomic and intrinsic real estate cycle dimensions, that contributed to this strong global cycle. This overview has three threads: What triggered this first global cycle? What has been its impact? Are there lessons for countries that are not yet fully integrated into global capital markets such as semireformed socialist economies, newly industrialized economies, and other developing countries?II y a quelque chose de commun entre l'art du puzzle et l'art du go; seules les pièces rassemblées prendront un caractère lisible, prendront un sens: considèrée isolément une piece d'un puzzle ne veut rien dire, elle est seulement question impossible, défi opaque.—George Perec, La vie, mode d'emploi1