Terms-of-trade shocks are known to be key drivers of business cycles in open economies. This paper argues that terms-of-trade shocks were also important for house price fluctuations in a panel of developed countries over the 1994–2015 period. In a panel vector error-correction model of house prices, household debt and real tradable prices, terms-of-trade shocks explain between 16 and 41 per cent of the long-run variance in house price growth in a typical country, and from 45 to 85 per cent of the long-run variance of the ratio of house prices to non-housing consumption. Most of the variation in the house price/consumption ratio is associated with changes in real import prices, with idiosyncratic shocks to real export prices playing a minor role. On average, a permanent 1 per cent decline in real import prices raises the ratio of real house prices to non-housing consumption by about 0.9 per cent.