If rising property prices are or are becoming a global problem, what can governments do about it?
Million dollar question.
There are lots of reasons why policymakers might look at what's happening in the real estate market with a pang of concern.
If rising prices for ordinary single family homes are making it harder for families to buy and accommodate themselves, that's something that governments could care about.
The simple fact is that they could stop a property cycle tomorrow by raising interest rates.
But that would also probably lead to recessionary impacts as well, you know, really exacerbating what is already slowing economic growth in countries like the UK, parts of western Europe.
But then there are kind of more abstruse financial reasons to care about rising prices. Is this a speculative bubble?
Will prices suddenly fall at some point in the future in a way that puts the stability of the banking system at risk?
There probably is a global solution, but it's not one that has much to do with real estate.
It's one that tries to make banks and financial institutions safe, even if it's possible for investors to lose lots of money by betting on real property.
Quite a few governments have introduced taxes on high-end properties, or taxes aimed to deter purely investment purchases or to deter people from having multiple homes.
And it has really sort of squelched quite a few of the high-end markets. We've seen real declines over the past couple of years.
One of the things that's happening in New York right now is there's a glut of available property at the luxury end.
Developers built too many luxury apartments and they didn't buy enough affordable housing.
Partly because obviously they can make a lot more money if they sell luxury housing than if they sell mid-market properties.
The right solution might be just to try and build more houses.?
That's it. They just need more homes. Sorry. We need more homes.
Extra supply kind of will limit price increases like nothing else.
The extremely high house prices in cities like London mean that it's not affordable to live in the city for the people that the city really needs to be working there in order to function.
Key workers like nurses, but there's also people with sort of less obvious jobs but who really still keep the whole system working, like people who work in Pret a Manger and cleaners, and just these kind of armies of people that enable others to get on with their lives.
If they can't live in the city, then the whole kind of ecosystem of it is under threat.
So while we can debate at huge length whether the market or the government is to blame, there's certainly a failure happening there that really needs to be addressed.