The main question is, what would be the source of the bubble?
Is it cheap capital? Fraudulent bank practices? Or is it because people wanted more space during lockdowns while having the sense of financial stability?
If the demand increased while supply stayed constant, the price increase is not a bubble. I waited for "the bubble to burst" for years before realizing there likely is no bubble where I am from. Housing's just expensive.
My tip is "distrust against the future value of the currency". Bricks do depreciate as well, but not massively.
The bond buying programs of the ECB are pretty expensive already, and the Green New Deal will be mostly implemented on credit. And Europe is already quite deep in debt. So is the USA, but the USA can at least derive some strength from the dollar being the world reserve currency, with no clear challenger in view.
Because tons of professions, small business, workers laid off, etc suffered from the lockdowns, so there was not exactly clear that "people had more money to spend".
The markets are not invididuals, if we're talking about stock markets. And in Europe they don't represent most of the population as asset holders or anything like that.
Case in point for France:
"There was an 8.3% decrease in France’s economy in 2020, and the country has not seen a recession to this extent since World War II. For example, France’s travel and tourism sector’s contribution to the French economy decreased by 48.8% due to travel restrictions. As a result, that sector alone lost 193,000 jobs. (...) Before the pandemic, 9.3 million people lived below the 1,063-euros-per-month poverty line in France. Those who were poor had little opportunity to improve their lives, especially during the pandemic when unemployment rates reached a two-year high. As a result, retail workers, artisans and self-employed people were among those the pandemic most affected. Further, the number of French people in poverty has significantly increased to more than 1 million people during the pandemic. (...)"
>As a concrete example, bank account deposits in the UK rose 10% during COVID.
That's one disconnect. Most people don't have bank account deposits (or don't have any to write home about). That's apparently true for the US too...
>areful, the French measure of “poverty” is a percentage of the median income. It’s more an indicator of inequality than anything else
It does say "below the 1,063-euros-per-month poverty line in France" which whether it was calculated with the median income in mind or not, it's quite fine as a poverty measure, not just inequality (that's like making less than $12K/year, or if we adjust for cosr of life, less than $18K/year or so).
Yes. That’s clearly what happened. But lots of people, myself included, expected prices to go down. The early pandemic was marked by a market meltdown and a shutdown of the timber and housing industry as analysts expected a drastic slowdown in home buying and building. It was perfectly reasonable at the time to assume (or hope!) that house prices were going to fall, and let's not brow beat people over that.
Yeah, similar event happened to the car industry. Analysts and factories forecasted dramatic slowdown in sales, so are rental car companies. Yet after the reduction in investments happened, it turned out consumers in COVID prefer to buy additional cars, or rent to go to smaller towns. Cue pandemonium. (And the supply chain shortages of chips)
To be fair, if COVID happened anytime before broadband is available to homes, the analyses wouldn't miss. Novel pandemic, novel technologies, novel situations all around.
In the UK, people who suffered were low wage, casual workers such as hospitality staff- typically not people who were in the house buying market to begin with.
Public sector workers and corporate employees tended to fair well because they were 'working from home' and not paying a siginificant part of their income on getting to the office and back.
Factor in, also, much less properties available. I was looking for a house at the time and anything that came onto the market was getting snapped up in no time at all. This lack of supply soon translated into increasing asking prices.
Except that they’re not driving to work, they’re not eating at the cantine/restaurant at lunchtime, they’re not going on holiday, they’re not going out in the evening…
I've noticed that the covid crisis has resulted in steady or even growing home purchases, many of them as second homes. In the US there was a lot of talk in 2021 of those who had not lost their jobs sitting on more liquidity than ever before, so I'd assume it's many of these people who jumping into the housing market.
Interest rates fell dramatically, government stimulus/cash transfers were far in excess of any lost wages, fewer people wanted to list houses and do showings due to covid.
Is it cheap capital? Fraudulent bank practices? Or is it because people wanted more space during lockdowns while having the sense of financial stability?
If the demand increased while supply stayed constant, the price increase is not a bubble. I waited for "the bubble to burst" for years before realizing there likely is no bubble where I am from. Housing's just expensive.