What led to the huge rise in property prices?
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What led to the huge rise in property prices?


OK, here you go. Yeah. You’ll never make it without it. OK. So here we go. What has led to the huge
rise in property prices? The major part of the
answer to that question has to be monetary policy
and quantitative easing. Quantitative easing. That really rolls
off of the tongue. What central banks have
been up to since the crisis. If you think back to 2006,
2007, people were really worried that we were heading for
a new Great Depression, that we’d have a repeat of
the 1930s in which the economy would fall into a hole
from which it would be very hard to climb out. Central bankers took a
decision that surprised many. After the crisis
central banks helped to keep financial markets
afloat by buying lots of bonds. And so investors suddenly
wanted new sources of income. Lots of money has been seeking
homes in this QE-fuelled boom that we’ve experienced
in the last decade. There’s lower interest
rates, and there has been for a few years now. And so that means it’s
cheaper to borrow. And so a lot of people
have been able to buy. A decade ago your
savings account might have been paying
7 or 8 per cent. For much of the past decade the
savings accounts have paid 0. It kind of created a demand. And when there is more demand,
of course, the price goes up. The second big point to make
here is about urbanisation. More than half of the
world’s population lives in cities, now. And as people move
into the cities, that’s pushing house prices up. The one’s that are
booming right now, there’s not necessarily
enough space, you know. Think about San Francisco. It’s a peninsula. It’s confined. There’s just not enough housing. And there’s a tonne of demand
to live in certain cities. The prices continue to go up. People used to have
this dream of kind of a home in the suburbs, with
a little garden, maybe a picket fence, roses around the
door, that sort of thing. Now, that’s sort of less of
a dream for a lot of people. People want to be absolutely
in the heart of things. They want to, as
property developers say, live, work, and play in
the same sorts of areas. So that’s driving
people into cities, as well, hence, some of the
really extraordinary prices we’ve been seeing. If you think about property, it
goes in a pretty clear cycle. And these can be 10-year cycles. Go back 10 years, 2008, 2009. 10 years before that,
the dotcom boom. We saw the property prices were
impacted somewhat after that. Going back before then, it’s
the 1989, 1990 downturn. And so you can pretty
much put your money on the cycle coming back again.

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