1 00:00:07,600 --> 00:00:09,920 Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the 2 00:00:09,920 --> 00:00:12,920 Speaker 1: global economy to you. And in this last episode of 3 00:00:13,000 --> 00:00:16,239 Speaker 1: the series, we have to talk about housing. Where we 4 00:00:16,320 --> 00:00:18,599 Speaker 1: live is often a big part of who we are. 5 00:00:18,920 --> 00:00:21,440 Speaker 1: If we're lucky, it's also our main source of wealth, 6 00:00:21,600 --> 00:00:25,960 Speaker 1: quite possibly our retirement plan. But for many many others, 7 00:00:26,280 --> 00:00:29,160 Speaker 1: finding and keeping a home it's what keeps them living 8 00:00:29,200 --> 00:00:32,600 Speaker 1: on the edge, a constant financial burden and source of stress. 9 00:00:33,280 --> 00:00:35,800 Speaker 1: And because it does play such a big role in 10 00:00:35,920 --> 00:00:40,600 Speaker 1: all our lives, property as also historically played an outsized 11 00:00:40,680 --> 00:00:42,960 Speaker 1: role in the ups and downs of the economy. In 12 00:00:42,960 --> 00:00:44,839 Speaker 1: a little while, I'll be taking a quick tour of 13 00:00:44,880 --> 00:00:48,120 Speaker 1: the world's property markets with Bloomberg economist near Our Shah, 14 00:00:48,600 --> 00:00:52,880 Speaker 1: warming up for an expansive, even philosophical conversation with Bloomberg 15 00:00:53,000 --> 00:00:56,800 Speaker 1: Star columnist John Authors, asking why it is that real 16 00:00:56,920 --> 00:01:00,280 Speaker 1: estate causes us so much trouble and which of theollowing 17 00:01:00,640 --> 00:01:02,960 Speaker 1: are most likely to blow up the global economy, this 18 00:01:03,000 --> 00:01:07,120 Speaker 1: time around bankrupt property developers in New York or China. 19 00:01:08,000 --> 00:01:12,600 Speaker 1: But first, US economy reporter Maria Paula Micharris Doris has 20 00:01:12,680 --> 00:01:16,920 Speaker 1: this ground level view of the increasingly cutthroat market for 21 00:01:17,080 --> 00:01:21,759 Speaker 1: US rentals, where suppliers tight and costs for even long 22 00:01:21,840 --> 00:01:37,119 Speaker 1: time renters are soaring despite whether the rents go up 23 00:01:37,200 --> 00:01:41,319 Speaker 1: or not. I can't afford anything until I get some 24 00:01:41,440 --> 00:01:44,960 Speaker 1: help from the government with disability from solving secured so 25 00:01:45,080 --> 00:01:47,360 Speaker 1: that the story is, yes, we have higher rent and 26 00:01:47,440 --> 00:01:50,800 Speaker 1: now the higher rents are now backering in my ability 27 00:01:50,800 --> 00:01:55,600 Speaker 1: to rent an apartment in my busical condition because the 28 00:01:55,680 --> 00:01:58,920 Speaker 1: rents are higher. Deny Keiner had a plan to deal 29 00:01:59,040 --> 00:02:01,640 Speaker 1: with the big increase in the monthly rent for his 30 00:02:01,760 --> 00:02:05,080 Speaker 1: as big as apartment to spring. You figure he would 31 00:02:05,080 --> 00:02:08,720 Speaker 1: just take extra ships at his pretending job on the strip. 32 00:02:09,600 --> 00:02:14,440 Speaker 1: Then life intervened a diagnosis of pancreatic cancer and made 33 00:02:14,480 --> 00:02:17,800 Speaker 1: it hard for him to move, let alone work, and 34 00:02:17,880 --> 00:02:22,760 Speaker 1: he lost his job. Now he's facing eviction. I don't 35 00:02:22,800 --> 00:02:27,160 Speaker 1: have enough strength. I'm physically able to walk around like 36 00:02:27,360 --> 00:02:30,560 Speaker 1: a regular person. I can walk maybe a quarter mile 37 00:02:30,600 --> 00:02:34,800 Speaker 1: and then I'm done physically. So the question at some 38 00:02:34,880 --> 00:02:38,000 Speaker 1: point in my life, this terminal disease will kick in 39 00:02:38,760 --> 00:02:42,520 Speaker 1: to where I can't do anything like even work from 40 00:02:42,520 --> 00:02:47,080 Speaker 1: a laptop. Cannery is among the eight point four million 41 00:02:47,120 --> 00:02:50,560 Speaker 1: Americans who are laid on rent payments as prices continue 42 00:02:50,600 --> 00:02:53,200 Speaker 1: to increase. According to data by the U S and 43 00:02:53,240 --> 00:02:59,280 Speaker 1: SIS Bureau, that is of o U S renters. As 44 00:02:59,360 --> 00:03:03,240 Speaker 1: rental cut sore across the country, Americans are struggling to 45 00:03:03,320 --> 00:03:07,600 Speaker 1: keep up. Single family rents grows by a record of 46 00:03:07,639 --> 00:03:12,320 Speaker 1: fourteen percent nationally over the past year, according to core Logic, 47 00:03:12,760 --> 00:03:16,240 Speaker 1: a real state data firm, But the increases were even 48 00:03:16,280 --> 00:03:19,760 Speaker 1: more dramatic in cities that became popular living destinations during 49 00:03:19,800 --> 00:03:23,880 Speaker 1: the pandemic, including a four one percent increase in Miami, 50 00:03:24,720 --> 00:03:28,280 Speaker 1: a twenties six percent rise in Orlando, and an eighteen 51 00:03:28,320 --> 00:03:32,200 Speaker 1: percent jump in Phoenix. Some tenants are seeing their mostly 52 00:03:32,200 --> 00:03:36,160 Speaker 1: rent bills rise by several hundred dollars even after years 53 00:03:36,280 --> 00:03:40,240 Speaker 1: of living in the same apartment. The government block landlords 54 00:03:40,400 --> 00:03:43,440 Speaker 1: from a big tim many people during the pandemic, but 55 00:03:43,560 --> 00:03:48,160 Speaker 1: those moratoriums are ending, so too are many emergency rental 56 00:03:48,160 --> 00:03:53,200 Speaker 1: assistance programs. Now there's a very real chance many Americans 57 00:03:53,240 --> 00:03:56,520 Speaker 1: could be forced out of their homes. It's pretty much 58 00:03:56,520 --> 00:04:00,880 Speaker 1: the perfect storm for renters right now. That was Kate Reynolds, 59 00:04:01,040 --> 00:04:05,160 Speaker 1: principal policy associated at the Washington based Urban Institute. So 60 00:04:05,200 --> 00:04:08,840 Speaker 1: emergency rental release was authorized as a response to the 61 00:04:08,840 --> 00:04:12,360 Speaker 1: pandemic a total of forty seven billion dollars. And these 62 00:04:12,400 --> 00:04:16,640 Speaker 1: were authorized back at the beginning of What we're seeing 63 00:04:16,640 --> 00:04:18,760 Speaker 1: now is that a lot of that funding has been 64 00:04:18,800 --> 00:04:22,680 Speaker 1: spent down and those renters and and their landlords are 65 00:04:22,800 --> 00:04:24,560 Speaker 1: you know, don't have a place to turn if they're 66 00:04:24,600 --> 00:04:27,279 Speaker 1: unable to pay the rent. She says that for the 67 00:04:27,360 --> 00:04:30,560 Speaker 1: first time since the pandemic began, an increasing number of 68 00:04:30,600 --> 00:04:34,560 Speaker 1: Americans are on their own to COVID strowing housing costs 69 00:04:35,520 --> 00:04:40,400 Speaker 1: during the pandemic. Combination of national, state and local moratoriums 70 00:04:40,600 --> 00:04:43,320 Speaker 1: you have a lifeline to millions of Americans thrown out 71 00:04:43,320 --> 00:04:46,799 Speaker 1: of work or forced to stay home to care for children. 72 00:04:48,040 --> 00:04:52,280 Speaker 1: Starting in March, the Federal Cares Act put in the 73 00:04:52,320 --> 00:04:56,440 Speaker 1: initial one d twenty day ban on evictions that covered 74 00:04:56,800 --> 00:04:59,480 Speaker 1: as many as forty five percent of U S renters 75 00:05:00,000 --> 00:05:04,760 Speaker 1: according to Urban Insitute estimates. That was followed up by 76 00:05:04,760 --> 00:05:09,200 Speaker 1: a sweeping moratorium imposed by the Federal Centers for the 77 00:05:09,320 --> 00:05:14,240 Speaker 1: c Control and Prevention, which covered millions more American throughout 78 00:05:14,279 --> 00:05:21,120 Speaker 1: parts of However, by August of last year, the US 79 00:05:21,120 --> 00:05:24,320 Speaker 1: Supreme Court struck down the federal moratorium and in art 80 00:05:24,360 --> 00:05:29,560 Speaker 1: evictions to RACEUME. So for the first time ever UM 81 00:05:29,640 --> 00:05:33,720 Speaker 1: in June, we saw median rant prices go above two 82 00:05:34,160 --> 00:05:38,560 Speaker 1: thousand dollars a month, and you have inflation on essentials 83 00:05:38,680 --> 00:05:42,159 Speaker 1: like gas, food and groceries as well as energy costs. 84 00:05:42,400 --> 00:05:45,440 Speaker 1: And then on top of all of that, eviction moratoria 85 00:05:45,480 --> 00:05:50,880 Speaker 1: were also extended during the pandemic, both by Congress and 86 00:05:51,279 --> 00:05:55,840 Speaker 1: by UM. The Centers for Disease Control and Prevention, and 87 00:05:56,400 --> 00:06:01,280 Speaker 1: some local places also had policies and eas. All of 88 00:06:01,360 --> 00:06:06,040 Speaker 1: those have expired. There's a few local exceptions. But what 89 00:06:06,200 --> 00:06:08,960 Speaker 1: we did see is that UM, during the time that 90 00:06:09,080 --> 00:06:13,360 Speaker 1: those eviction moratory were in place, that eviction filings really 91 00:06:13,440 --> 00:06:17,160 Speaker 1: did stay below average levels. And so all of these 92 00:06:17,240 --> 00:06:20,560 Speaker 1: things are sort of happening at the same time, which 93 00:06:22,320 --> 00:06:25,479 Speaker 1: is really difficult for a lot of friends or households. 94 00:06:25,920 --> 00:06:30,560 Speaker 1: There is a great research study out of California that 95 00:06:30,960 --> 00:06:35,440 Speaker 1: came out, you know, mid in mid crisis UM, that 96 00:06:35,560 --> 00:06:38,440 Speaker 1: basically showed that a lot of renter households had what 97 00:06:38,640 --> 00:06:43,240 Speaker 1: we call shadow debts UM, so renters were taking on 98 00:06:43,960 --> 00:06:46,000 Speaker 1: debt in order to pay their rent because you know, 99 00:06:46,120 --> 00:06:50,800 Speaker 1: folks worry about UM, you know, in eviction filing or 100 00:06:50,880 --> 00:06:53,160 Speaker 1: losing their housing and so a lot of times we've 101 00:06:53,240 --> 00:06:56,320 Speaker 1: seen that. UM. What we say sometimes is that the 102 00:06:56,400 --> 00:07:01,160 Speaker 1: rent eats first, UM. And what that means is that folks, uh, 103 00:07:01,720 --> 00:07:04,160 Speaker 1: you know, put money their money towards rents, even if 104 00:07:04,240 --> 00:07:08,240 Speaker 1: it means that they can't, you know, buy groceries, even 105 00:07:08,320 --> 00:07:12,239 Speaker 1: when someone isn't facing eviction. A shortage of available housing 106 00:07:12,400 --> 00:07:15,160 Speaker 1: and a search of people moving to warmer climates has 107 00:07:15,240 --> 00:07:19,600 Speaker 1: given landlords an advantage over their tenants. In many cases, 108 00:07:19,840 --> 00:07:22,960 Speaker 1: then there's are boosting rents by hundreds of dollars and 109 00:07:23,080 --> 00:07:27,760 Speaker 1: renters have those choice but to pay for it. Last Yanuary, 110 00:07:28,040 --> 00:07:30,760 Speaker 1: Carlia Kelly was unable to renew the lease of the 111 00:07:30,840 --> 00:07:33,920 Speaker 1: two bedroom apartment where she has lived since the thousand 112 00:07:34,080 --> 00:07:38,080 Speaker 1: nine in the Atlanta suburb of Duluth, Georgia. People from 113 00:07:38,120 --> 00:07:42,320 Speaker 1: the northeastern California were higher than here. They think george 114 00:07:42,480 --> 00:07:46,160 Speaker 1: is less expensive and where people can work remotely from 115 00:07:46,200 --> 00:07:48,880 Speaker 1: a number of jobs. Now they don't necessarily have to 116 00:07:48,960 --> 00:07:52,080 Speaker 1: be where their company is headquartered. So we do have 117 00:07:52,200 --> 00:07:55,800 Speaker 1: a big influx of people from the Northeast and from 118 00:07:55,880 --> 00:07:59,360 Speaker 1: California moving to Georgia. So there was that thing shortage 119 00:07:59,400 --> 00:08:03,120 Speaker 1: of a part the company that owned the building decided 120 00:08:03,160 --> 00:08:06,440 Speaker 1: to the renovations that could accommodate new residents who moved 121 00:08:06,480 --> 00:08:08,960 Speaker 1: from more expensive cities and are willing to pay more 122 00:08:09,080 --> 00:08:12,320 Speaker 1: for rent. The landlord offered her a space in another 123 00:08:12,400 --> 00:08:15,840 Speaker 1: of its buildings, bosting her rent by almost six hundred 124 00:08:15,880 --> 00:08:18,280 Speaker 1: dollars a month. And the night I got the keys, 125 00:08:18,440 --> 00:08:22,680 Speaker 1: there were cockroaches running all around the apartment. That was like, 126 00:08:22,920 --> 00:08:27,240 Speaker 1: pictures were rusted. Light coaches didn't work. Carpeting in the 127 00:08:27,320 --> 00:08:31,560 Speaker 1: bedrooms was old, um thoughts that didn't work. I mean, 128 00:08:31,640 --> 00:08:34,079 Speaker 1: there was just a whole list of stuff. The parments 129 00:08:34,080 --> 00:08:38,240 Speaker 1: builder hadn't been changed. Um, it was just it was horrible. 130 00:08:40,200 --> 00:08:43,400 Speaker 1: Back in Las Vegas, Keener's rent went from seven hundred 131 00:08:43,520 --> 00:08:46,640 Speaker 1: fifty to one thousand dollars for our one bedroom, one 132 00:08:46,720 --> 00:08:51,320 Speaker 1: bathroom apartment. That might sound cheap for New Yorkers and Californians, 133 00:08:51,640 --> 00:08:55,679 Speaker 1: but very expensive for people in Las Vegas. Unable to 134 00:08:55,760 --> 00:08:59,960 Speaker 1: work and facing possible eviction. He's hoping to win financial 135 00:09:00,000 --> 00:09:04,040 Speaker 1: assistance from a government program that helps low income Americans 136 00:09:04,080 --> 00:09:08,920 Speaker 1: with housing costs. However, his application has been tied up 137 00:09:09,000 --> 00:09:12,920 Speaker 1: for months. The money is they opened the federal government 138 00:09:13,320 --> 00:09:16,120 Speaker 1: and needs to corps, to these very i agencies. But 139 00:09:16,360 --> 00:09:19,360 Speaker 1: there's so many people applying for this, but they've called 140 00:09:19,559 --> 00:09:22,240 Speaker 1: created a weights so I can even apply for the 141 00:09:22,320 --> 00:09:25,200 Speaker 1: month with the help of a lawyer. He's doing an 142 00:09:25,240 --> 00:09:28,120 Speaker 1: eviction appeal to buy more time before he has nowhere 143 00:09:28,120 --> 00:09:32,280 Speaker 1: else to go. As we speak, he's backing his belongings 144 00:09:32,320 --> 00:09:35,240 Speaker 1: into storage to be pretty moved to a homeless shelter 145 00:09:35,880 --> 00:09:41,160 Speaker 1: whenever he gets evicted. For Bloomberg News, this is Mariab Stories. 146 00:09:46,400 --> 00:09:49,600 Speaker 1: I wanted to start with that piece because conversations about 147 00:09:49,640 --> 00:09:52,240 Speaker 1: property so often revolve around what's going to happen to 148 00:09:52,320 --> 00:09:55,599 Speaker 1: house prices and mortgage rates. We talked less about the 149 00:09:55,640 --> 00:09:58,240 Speaker 1: consequences of those things for a renter just looking for 150 00:09:58,320 --> 00:10:02,000 Speaker 1: somewhere affordable to live. But super low mortgage rates are 151 00:10:02,080 --> 00:10:05,200 Speaker 1: one reason why property prices and rents have been going 152 00:10:05,400 --> 00:10:08,240 Speaker 1: up and up around the world in recent years, and 153 00:10:08,400 --> 00:10:10,439 Speaker 1: especially if you live in the US or the UK. 154 00:10:11,120 --> 00:10:13,760 Speaker 1: You'll know that the property boom didn't let up during 155 00:10:13,800 --> 00:10:18,520 Speaker 1: the pandemic. If anything, it accelerated. So now mortgage rates 156 00:10:18,600 --> 00:10:21,160 Speaker 1: are finally heading up in many countries. You have to 157 00:10:21,240 --> 00:10:25,240 Speaker 1: wonder which property market will pop first, and what the 158 00:10:25,320 --> 00:10:28,680 Speaker 1: collateral damage will be our UK economists. Near Our Shah 159 00:10:28,760 --> 00:10:31,400 Speaker 1: has been looking at a series of indicators for nineteen 160 00:10:31,520 --> 00:10:34,680 Speaker 1: property markets around the world. Has some answers to that question. 161 00:10:35,200 --> 00:10:37,559 Speaker 1: Near Ash, thank you very much for doing this, Thank 162 00:10:37,640 --> 00:10:39,800 Speaker 1: you for having me on, Stephanie. So we should cut 163 00:10:39,840 --> 00:10:42,040 Speaker 1: to the chase. Everyone wants to know whether they're sitting 164 00:10:42,080 --> 00:10:43,960 Speaker 1: in a place that's about to blow up. So which 165 00:10:44,040 --> 00:10:48,160 Speaker 1: countries came top in our in our rankings as places 166 00:10:48,240 --> 00:10:51,880 Speaker 1: to watch? So New Zealand camp top, but Australian Cannedy 167 00:10:51,960 --> 00:10:54,439 Speaker 1: were up there as well, and all of those countries 168 00:10:54,480 --> 00:10:57,960 Speaker 1: are showing now signs of cooling. The more striking thing 169 00:10:58,200 --> 00:11:01,880 Speaker 1: is Toronto, where as you've seen quite dramatic price falls, 170 00:11:02,400 --> 00:11:04,319 Speaker 1: and so that's something to watch out having had big 171 00:11:04,400 --> 00:11:08,719 Speaker 1: house price rises for a long indeed exactly exactly. But 172 00:11:08,840 --> 00:11:11,800 Speaker 1: the other places a Czech Republic is well up there 173 00:11:12,480 --> 00:11:16,200 Speaker 1: from the European Union, but also Portugal within the UR Area. 174 00:11:16,520 --> 00:11:18,959 Speaker 1: Now both those are not actually sharing signs of cooling 175 00:11:19,120 --> 00:11:21,400 Speaker 1: as yet, and so but something to want to look 176 00:11:21,400 --> 00:11:25,679 Speaker 1: out for, especially as the ECB starts raising rates from 177 00:11:25,800 --> 00:11:28,640 Speaker 1: this month and possibly by fifty basis points in September. 178 00:11:29,040 --> 00:11:31,960 Speaker 1: It's interesting because a lot of the countries that we mentioned, 179 00:11:32,120 --> 00:11:35,000 Speaker 1: certainly Australia and Canada, are actually countries that kind of 180 00:11:35,200 --> 00:11:39,120 Speaker 1: didn't have a housing market crash in the global financial crisis. 181 00:11:39,200 --> 00:11:41,160 Speaker 1: They sort of dodged that bullet. But it also meant 182 00:11:41,240 --> 00:11:43,160 Speaker 1: that prizes were able to just keep going up and 183 00:11:43,280 --> 00:11:46,480 Speaker 1: up and up and up, and they get even less affordable. 184 00:11:46,960 --> 00:11:49,360 Speaker 1: There is a lot of focus on America, given that 185 00:11:49,520 --> 00:11:51,400 Speaker 1: it was the U s sub prime market that played 186 00:11:51,440 --> 00:11:53,960 Speaker 1: such a big role in triggering that global financial crisis 187 00:11:54,000 --> 00:11:56,360 Speaker 1: in two thousand and eight. Actually, there was a fascinating 188 00:11:56,520 --> 00:11:59,439 Speaker 1: statistic that the Deputy Governor of the Bank of England 189 00:11:59,480 --> 00:12:02,280 Speaker 1: then broad been calculated at the time. I remember he 190 00:12:02,400 --> 00:12:05,520 Speaker 1: calculated that UK banks had lost a lot more money 191 00:12:05,600 --> 00:12:10,680 Speaker 1: on US subprime assets going into that crisis than they 192 00:12:10,720 --> 00:12:14,360 Speaker 1: ever did on the UK housing market. So people are 193 00:12:14,400 --> 00:12:17,040 Speaker 1: looking again at the US and saying, could this now 194 00:12:17,800 --> 00:12:21,240 Speaker 1: cause another global problem? Is it in a stronger position 195 00:12:21,280 --> 00:12:23,360 Speaker 1: now than it was then? Well, you absolutely right to 196 00:12:23,600 --> 00:12:26,400 Speaker 1: focus on the US. It is actually up there within 197 00:12:26,559 --> 00:12:29,120 Speaker 1: what the country to look out for, um, But it 198 00:12:29,320 --> 00:12:32,040 Speaker 1: is actually in a much stronger position than in two 199 00:12:32,080 --> 00:12:35,199 Speaker 1: thousand and eight, and I think it's not only just 200 00:12:35,520 --> 00:12:39,400 Speaker 1: tight lending standards than they were during the subprime crisis, 201 00:12:40,320 --> 00:12:42,600 Speaker 1: it's also the quality of buyer and what I mean 202 00:12:42,720 --> 00:12:46,480 Speaker 1: by that the last cycle, anyone could practically by get 203 00:12:46,559 --> 00:12:49,720 Speaker 1: a mortgage. This time, it's been quite difficult for those 204 00:12:49,880 --> 00:12:52,280 Speaker 1: on more wonderable incomes and so on to get a mortgage. 205 00:12:52,520 --> 00:12:54,880 Speaker 1: So we already on a stronger platform in that sense. 206 00:12:55,320 --> 00:12:57,760 Speaker 1: Sean Donald, who is often on this program, he had 207 00:12:57,760 --> 00:13:01,000 Speaker 1: done some fascinating analysis of nicely that point. On the 208 00:13:01,080 --> 00:13:03,480 Speaker 1: other from the other direction, that actually that it was 209 00:13:04,000 --> 00:13:06,880 Speaker 1: many African American households who weren't particularly poor we're being 210 00:13:06,960 --> 00:13:08,880 Speaker 1: shut out of the lending boom and the sort of 211 00:13:08,960 --> 00:13:11,079 Speaker 1: mortgages that you've seen over the last few years in 212 00:13:11,080 --> 00:13:15,160 Speaker 1: the US. I mean more broadly, households do seem to 213 00:13:15,200 --> 00:13:17,280 Speaker 1: be in stronger shape. You know, we talk about the 214 00:13:17,360 --> 00:13:20,520 Speaker 1: cash that's built up in different countries in the US 215 00:13:20,600 --> 00:13:24,000 Speaker 1: and the UK from the COVID crisis. People still have 216 00:13:24,080 --> 00:13:26,480 Speaker 1: a bit of extra cash in their bank accounts. Um 217 00:13:26,960 --> 00:13:30,120 Speaker 1: in most cases you also have a fixed rate mortgage. 218 00:13:30,240 --> 00:13:32,800 Speaker 1: So when the European Central Bank or the Bank of 219 00:13:32,840 --> 00:13:36,319 Speaker 1: England raises interest rates or the FED, that doesn't immediately 220 00:13:36,400 --> 00:13:41,559 Speaker 1: affect your the cost of your of your mortgage right then, absolutely. 221 00:13:41,760 --> 00:13:44,240 Speaker 1: But when you talk about fixed rates, and the US 222 00:13:44,280 --> 00:13:46,520 Speaker 1: has always been one of those countries where you used 223 00:13:46,520 --> 00:13:48,880 Speaker 1: to have ten thirty years do make the average the 224 00:13:48,960 --> 00:13:50,839 Speaker 1: normal to get a thirty year fixed rate, which I 225 00:13:50,880 --> 00:13:53,040 Speaker 1: thought was incredible when I lived at the stakes, But 226 00:13:53,160 --> 00:13:56,079 Speaker 1: globally now that has been going and so the UK 227 00:13:56,679 --> 00:14:00,079 Speaker 1: you have eight actually over eighty percent of people on 228 00:14:00,200 --> 00:14:03,360 Speaker 1: fixed rates, and significant of those are not going to 229 00:14:03,440 --> 00:14:06,160 Speaker 1: be renewing them until two years time in the line, 230 00:14:06,320 --> 00:14:08,520 Speaker 1: so they've got that breathing space to adjust and doubt 231 00:14:08,760 --> 00:14:10,559 Speaker 1: you point out, and in the piece that you've written, 232 00:14:10,559 --> 00:14:13,640 Speaker 1: you point out the house prices are record high globally. 233 00:14:13,679 --> 00:14:16,959 Speaker 1: There's an International Monetary Fund Global House Price Index which 234 00:14:17,000 --> 00:14:19,080 Speaker 1: is higher now even than it was before the last 235 00:14:20,000 --> 00:14:23,440 Speaker 1: the last crash. And we know in the US and 236 00:14:23,560 --> 00:14:26,760 Speaker 1: in UK and Europe it's a constant source of discussion 237 00:14:26,840 --> 00:14:29,880 Speaker 1: how difficult it is for young people to get on 238 00:14:29,960 --> 00:14:33,720 Speaker 1: the housing ladder to buy houses. Um. Yet you know, 239 00:14:33,840 --> 00:14:36,920 Speaker 1: when government's tried to address this, the last thing that 240 00:14:37,040 --> 00:14:39,280 Speaker 1: they would appeal to is the idea of actually a 241 00:14:39,400 --> 00:14:41,560 Speaker 1: fall in house prices that would be the most direct 242 00:14:41,680 --> 00:14:45,040 Speaker 1: way of making houses more affordable um and instead they 243 00:14:45,160 --> 00:14:48,680 Speaker 1: have ways to coax people into buying houses and having 244 00:14:48,800 --> 00:14:50,840 Speaker 1: less and needing less and less money to buy a house. 245 00:14:51,120 --> 00:14:54,840 Speaker 1: We won't go into our respective ages, but you will 246 00:14:54,880 --> 00:14:57,720 Speaker 1: have I'm sure lots of friends who have faced this issue, 247 00:14:57,760 --> 00:15:00,640 Speaker 1: even with quite well paid jobs in in the UK 248 00:15:00,840 --> 00:15:03,400 Speaker 1: and in London. Is it just that the people who 249 00:15:03,480 --> 00:15:06,040 Speaker 1: have all the houses sit on now all this housing 250 00:15:06,320 --> 00:15:09,960 Speaker 1: value and vote a lot more regularly than the young 251 00:15:10,080 --> 00:15:13,280 Speaker 1: people that are struggling to get at home. It's quite 252 00:15:13,280 --> 00:15:15,520 Speaker 1: an interesting thing, isn't it, Where the people who are 253 00:15:15,520 --> 00:15:17,480 Speaker 1: on the housing ladder and so on are the ones 254 00:15:17,520 --> 00:15:20,960 Speaker 1: who tend to vote the most. And the other sort 255 00:15:20,960 --> 00:15:23,480 Speaker 1: of interesting thing on this is going back to how 256 00:15:24,880 --> 00:15:28,360 Speaker 1: most the first time the UK in many decades, you've 257 00:15:28,400 --> 00:15:32,640 Speaker 1: got more people who own their home outright then have mortgages. 258 00:15:32,880 --> 00:15:36,880 Speaker 1: The government is quite aware of all this so sort 259 00:15:36,880 --> 00:15:38,880 Speaker 1: of gives these trinkets of little things that we're doing 260 00:15:38,920 --> 00:15:40,880 Speaker 1: something to get to you on the ladder. But home 261 00:15:40,920 --> 00:15:45,320 Speaker 1: ownership has gone significantly down for those on the lowest 262 00:15:45,880 --> 00:15:50,680 Speaker 1: income groups and young age people. Basically it's halved of 263 00:15:50,760 --> 00:15:54,000 Speaker 1: the last I think fifteen years. And that's you know, 264 00:15:54,080 --> 00:15:57,120 Speaker 1: that's quite a shocking really with you and your friends 265 00:15:57,200 --> 00:15:59,440 Speaker 1: sort of you know, more or less starting out in 266 00:15:59,480 --> 00:16:02,160 Speaker 1: the in the working force, or quite early in your careers. 267 00:16:02,480 --> 00:16:04,360 Speaker 1: If you opened, if you if you turn on the 268 00:16:04,400 --> 00:16:06,720 Speaker 1: TV tonight and they said house prices early on a 269 00:16:06,800 --> 00:16:10,040 Speaker 1: four by ten percent or trying to strip out the 270 00:16:10,080 --> 00:16:12,080 Speaker 1: fact that you're an economist, and you would worry about 271 00:16:12,080 --> 00:16:14,160 Speaker 1: all the consequences. But just among your friends, I think 272 00:16:14,160 --> 00:16:16,120 Speaker 1: they would think it was good news. I can definitely 273 00:16:16,160 --> 00:16:17,480 Speaker 1: match for a few of my friends, they would be 274 00:16:17,480 --> 00:16:21,120 Speaker 1: absolutely celebrating. They do wish there's their house and crash. 275 00:16:21,240 --> 00:16:23,680 Speaker 1: I s this is about time, and they do resent 276 00:16:25,360 --> 00:16:28,720 Speaker 1: all the enormous blenks that governments try and go to 277 00:16:28,880 --> 00:16:31,960 Speaker 1: to prevent one. But again, this is the thing governments. 278 00:16:32,200 --> 00:16:35,080 Speaker 1: If if there is a housing crash, there would be 279 00:16:35,400 --> 00:16:38,240 Speaker 1: financial stability would be quite profound. You could have a 280 00:16:38,360 --> 00:16:40,400 Speaker 1: far deeper recession and so on. So would actould be 281 00:16:40,440 --> 00:16:43,040 Speaker 1: worsel for everyone. Sure that's what you say to your 282 00:16:43,080 --> 00:16:45,560 Speaker 1: friends when they say, what a great thing it would be. 283 00:16:46,720 --> 00:16:56,880 Speaker 1: Thank you very much, thank you very much. I'm delighted 284 00:16:57,000 --> 00:17:00,440 Speaker 1: now to be drawing all the strands together with one 285 00:17:00,480 --> 00:17:03,760 Speaker 1: of the stars in the world of financial journalism, John Authors, 286 00:17:04,119 --> 00:17:06,480 Speaker 1: for many, many years one of the most read columnists 287 00:17:06,520 --> 00:17:08,760 Speaker 1: for the Financial Times. In fact, we overlapped a little 288 00:17:08,800 --> 00:17:12,680 Speaker 1: bit at the Ft and now definitely the most read 289 00:17:12,720 --> 00:17:16,480 Speaker 1: columnists on finance and markets for Bloomberg. And John thank 290 00:17:16,560 --> 00:17:18,840 Speaker 1: you so much for taking time to be part of 291 00:17:18,920 --> 00:17:22,040 Speaker 1: our season finale. Well, thank you very much for that 292 00:17:22,280 --> 00:17:26,760 Speaker 1: very kind introduction. Yes, it's good to be working together again, 293 00:17:27,000 --> 00:17:29,480 Speaker 1: and appropriately given what we're going to talk about, your 294 00:17:29,520 --> 00:17:32,000 Speaker 1: sitting and you're talking to us from from New York, 295 00:17:32,480 --> 00:17:34,960 Speaker 1: and I wanted to focus on property in this episode, 296 00:17:35,080 --> 00:17:38,080 Speaker 1: not only because the cost of housing affects all of 297 00:17:38,200 --> 00:17:40,520 Speaker 1: us in one way or another, or because the ups 298 00:17:40,560 --> 00:17:43,800 Speaker 1: and downs in the value of real estate has historically 299 00:17:43,840 --> 00:17:46,919 Speaker 1: played such a role in amplifying the booms and busts 300 00:17:47,440 --> 00:17:50,920 Speaker 1: in the broader economy, but also it occurred to me 301 00:17:51,000 --> 00:17:53,480 Speaker 1: in a slightly more philosophical way that it seemed to 302 00:17:53,880 --> 00:17:58,440 Speaker 1: embody the tensions the contradictions we're seeing playing out in 303 00:17:58,680 --> 00:18:02,240 Speaker 1: this chapter of global capitalism. When you look at any 304 00:18:02,280 --> 00:18:06,359 Speaker 1: given country where governments and those who have prospered in 305 00:18:06,440 --> 00:18:08,959 Speaker 1: these years of rising asset prices they're all doing all 306 00:18:09,040 --> 00:18:12,680 Speaker 1: they can to prop up property markets, But then you 307 00:18:12,760 --> 00:18:15,399 Speaker 1: have a big chunk of the population, including lower income 308 00:18:15,480 --> 00:18:17,720 Speaker 1: households and young people. We heard some of them at 309 00:18:17,760 --> 00:18:20,520 Speaker 1: the beginning of the show who'd like nothing better than 310 00:18:20,600 --> 00:18:23,040 Speaker 1: to see house prices fall and for housing finally to 311 00:18:23,080 --> 00:18:25,920 Speaker 1: become more affordable. So, before we get into some of 312 00:18:26,000 --> 00:18:28,440 Speaker 1: the sort of market dynamics, where you stand on this 313 00:18:28,560 --> 00:18:32,280 Speaker 1: particular issue very much depends on where you live or 314 00:18:32,359 --> 00:18:37,719 Speaker 1: don't live, doesn't it. Well, certainly where I live in Manhattan, 315 00:18:38,600 --> 00:18:42,000 Speaker 1: the issue of affordability is about as acute as it's 316 00:18:42,040 --> 00:18:45,800 Speaker 1: possible to imagine. One of the critical problems you always 317 00:18:45,880 --> 00:18:49,920 Speaker 1: faced with their property is that even though people treated 318 00:18:49,960 --> 00:18:54,600 Speaker 1: as an investment, it's something you truly need. Shelter is 319 00:18:54,600 --> 00:18:59,320 Speaker 1: a very basic human need. You could argue it's almost 320 00:18:59,320 --> 00:19:04,560 Speaker 1: an urged it's it's um goes back to John Locke 321 00:19:05,440 --> 00:19:08,439 Speaker 1: and the whole idea of property rights, that you cannot 322 00:19:08,600 --> 00:19:13,359 Speaker 1: really be a full fledged citizen or a full fledged 323 00:19:13,480 --> 00:19:18,560 Speaker 1: participants in the economy without some property. So yes, it's 324 00:19:18,840 --> 00:19:24,080 Speaker 1: this is always more difficult for governments and more dangerous 325 00:19:24,240 --> 00:19:28,920 Speaker 1: for the economy than stocks. You could, let you know, 326 00:19:29,119 --> 00:19:33,280 Speaker 1: in two thousands, um the dot com boom blew up, 327 00:19:33,440 --> 00:19:36,720 Speaker 1: and there was a mild procession thereafter. In two thousand 328 00:19:36,760 --> 00:19:40,160 Speaker 1: and seven, the housing bubble blew up and all hell 329 00:19:40,240 --> 00:19:41,960 Speaker 1: broke loose, And there's a there's a reason for that. 330 00:19:42,080 --> 00:19:45,840 Speaker 1: You people can bear the notion of losing money on 331 00:19:46,000 --> 00:19:53,119 Speaker 1: other assets. Losing money on property is a fundamentally different proposition. 332 00:19:53,359 --> 00:19:57,320 Speaker 1: And that's why I would say you should always in 333 00:19:57,480 --> 00:20:01,840 Speaker 1: any kind of financial you know, tour of the horizon, 334 00:20:02,000 --> 00:20:04,920 Speaker 1: you should always be on the lookout for whether real 335 00:20:05,080 --> 00:20:09,120 Speaker 1: estate is in danger. That's what can tip a financial 336 00:20:09,160 --> 00:20:13,520 Speaker 1: event into something more serious. There's a lot of economic 337 00:20:13,560 --> 00:20:17,000 Speaker 1: evidence now that when you look back and you say, well, 338 00:20:17,040 --> 00:20:19,480 Speaker 1: why wasn't you know, for example, the you know, the 339 00:20:20,960 --> 00:20:26,320 Speaker 1: market crash of barely remembered now, and indeed the stock 340 00:20:26,359 --> 00:20:28,520 Speaker 1: market was more or less back where it was by 341 00:20:28,560 --> 00:20:30,960 Speaker 1: the end of that year. They didn't have that knock 342 00:20:31,040 --> 00:20:33,520 Speaker 1: on effect for the broader economy that you did see 343 00:20:33,720 --> 00:20:36,399 Speaker 1: for example before the global financial crisis when the U s. 344 00:20:36,560 --> 00:20:38,760 Speaker 1: US housing obviously triggered all these things. So it definitely 345 00:20:38,800 --> 00:20:40,399 Speaker 1: does seem to make the difference between the sort of 346 00:20:40,480 --> 00:20:44,280 Speaker 1: minor market correction and a broader economic recession. So I 347 00:20:44,359 --> 00:20:46,639 Speaker 1: guess that the big question we have to ask is 348 00:20:46,720 --> 00:20:49,800 Speaker 1: do you see that transition happening today? Do you see 349 00:20:49,920 --> 00:20:52,120 Speaker 1: enough problems in the housing market that what we've seen 350 00:20:52,200 --> 00:20:54,600 Speaker 1: in the financial markets in the last few months possibly 351 00:20:54,640 --> 00:20:58,960 Speaker 1: a bear market now that's going to turn into something 352 00:20:59,080 --> 00:21:03,760 Speaker 1: much worse. I do see the real possibility of that. 353 00:21:04,280 --> 00:21:06,800 Speaker 1: I don't. I wouldn't say it was yet an inevitability. 354 00:21:07,720 --> 00:21:10,920 Speaker 1: If you start with the States, then yes, house prices 355 00:21:11,119 --> 00:21:13,480 Speaker 1: are now even in real terms, higher than they were 356 00:21:13,520 --> 00:21:16,960 Speaker 1: at the top in two thousand and six. Uh. And 357 00:21:17,640 --> 00:21:21,760 Speaker 1: demand has been very aggressive and there is now clear 358 00:21:21,960 --> 00:21:26,719 Speaker 1: sign of a turn. You've seen new house sales falling 359 00:21:26,840 --> 00:21:29,399 Speaker 1: from a high level each month for several months now. 360 00:21:30,640 --> 00:21:35,280 Speaker 1: Measures of housing sentiments have got very much weaker. Uh. 361 00:21:35,680 --> 00:21:40,840 Speaker 1: And that's also you've got to throw in the very 362 00:21:40,920 --> 00:21:45,320 Speaker 1: serious displacements caused by the pandemic. Lots of areas are 363 00:21:45,400 --> 00:21:48,280 Speaker 1: much more appealing than they were three years ago, very suddenly, 364 00:21:48,880 --> 00:21:52,520 Speaker 1: and others are much less appealing. It's those sudden breaks 365 00:21:52,720 --> 00:21:58,560 Speaker 1: that markets can have a difficulty dealing with across the world. Um, 366 00:22:00,400 --> 00:22:03,400 Speaker 1: the UK has long had I don't need to tell 367 00:22:03,440 --> 00:22:08,600 Speaker 1: you that's a bad habit of when in doubt inflates 368 00:22:08,720 --> 00:22:13,520 Speaker 1: the stock market, and that leads to always the risk 369 00:22:13,640 --> 00:22:19,680 Speaker 1: of in Britain, of that a housing market can bring 370 00:22:19,880 --> 00:22:21,920 Speaker 1: the rest of the economy down. It's a it's a 371 00:22:22,040 --> 00:22:30,159 Speaker 1: very housing sensitive economy. Um. The great imponderable UH is China. 372 00:22:31,440 --> 00:22:35,720 Speaker 1: We know for years now that the Chinese authorities are 373 00:22:36,080 --> 00:22:39,560 Speaker 1: scared of a Minsky moment or a Lehman moment. You 374 00:22:39,640 --> 00:22:44,200 Speaker 1: know Minsky for those uninitiated, is the idea is that 375 00:22:44,320 --> 00:22:46,960 Speaker 1: the economist who came up with the idea that at 376 00:22:46,960 --> 00:22:50,960 Speaker 1: a certain point confidence in debt can be lost, and 377 00:22:51,119 --> 00:22:54,280 Speaker 1: that's when you have a crisis. For scale of what's 378 00:22:54,280 --> 00:22:57,920 Speaker 1: happened after Lehman Brothers in twoth has and eight um, 379 00:22:58,800 --> 00:23:02,040 Speaker 1: there is an an imaginably large amount of money that 380 00:23:02,160 --> 00:23:06,199 Speaker 1: has been borrowed for the state in China. There are 381 00:23:06,600 --> 00:23:13,320 Speaker 1: many property developers in very serious trouble UM and the 382 00:23:13,400 --> 00:23:17,639 Speaker 1: investment is falling there even as fixed assets in other 383 00:23:17,720 --> 00:23:21,840 Speaker 1: fictity investment is improving. It's plainly very much of an 384 00:23:21,880 --> 00:23:26,639 Speaker 1: Achilles heel for the Chinese property sector. For sorry, for 385 00:23:26,680 --> 00:23:30,879 Speaker 1: the Chinese economy. My best guess is that China is 386 00:23:30,920 --> 00:23:34,120 Speaker 1: still in enough control that it can manage a very 387 00:23:34,320 --> 00:23:40,280 Speaker 1: slow period of growth, possibly even a recession without a 388 00:23:40,359 --> 00:23:44,080 Speaker 1: blow up, without a major crisis for the rest of 389 00:23:44,119 --> 00:23:47,960 Speaker 1: the world having become as dependent as we have on 390 00:23:48,119 --> 00:23:52,080 Speaker 1: Chinese growth, that's still quite an alarming prospect. I mean, 391 00:23:52,119 --> 00:23:53,720 Speaker 1: there's probably a few things so that we should pick 392 00:23:53,800 --> 00:23:55,720 Speaker 1: up on. But just going back to going back to 393 00:23:55,760 --> 00:23:57,960 Speaker 1: the US, I mean, and it came up earlier in 394 00:23:58,000 --> 00:23:59,760 Speaker 1: the program as well, that you know, we had the 395 00:24:00,000 --> 00:24:03,680 Speaker 1: economy go south during COVID in a kind of dramatic way, 396 00:24:03,720 --> 00:24:06,679 Speaker 1: and then we've had the sort of interesting mixed up 397 00:24:06,720 --> 00:24:08,960 Speaker 1: pattern of the recovery, a different kind of recovery than 398 00:24:09,000 --> 00:24:11,480 Speaker 1: we've had before UM and that has caused its own 399 00:24:11,480 --> 00:24:13,680 Speaker 1: problems with supply chains and everything else that we've talked 400 00:24:13,720 --> 00:24:17,200 Speaker 1: a lot about in stephonomics. But actually house prices had 401 00:24:17,280 --> 00:24:20,960 Speaker 1: just carried on defying gravity for quite for most of 402 00:24:21,040 --> 00:24:23,760 Speaker 1: that period. Talk us through you know a little bit 403 00:24:23,800 --> 00:24:27,040 Speaker 1: of you know why that happened, where you think there's 404 00:24:27,080 --> 00:24:31,480 Speaker 1: most vulnerability with all real estates. Critical thing about real 405 00:24:31,560 --> 00:24:34,320 Speaker 1: estate is that it's leveraged, which is another reason why 406 00:24:34,359 --> 00:24:36,080 Speaker 1: we should really care about it from the point of 407 00:24:36,119 --> 00:24:41,480 Speaker 1: view of financial crises. So it's based based on borrow money. Yes, 408 00:24:41,560 --> 00:24:44,800 Speaker 1: exactly if if if if rich people use their money 409 00:24:44,880 --> 00:24:46,960 Speaker 1: to to bet on stocks that go up and then 410 00:24:47,000 --> 00:24:50,320 Speaker 1: come down again. Yeah, there are some wealth effects. But 411 00:24:50,960 --> 00:24:56,120 Speaker 1: so what if lots of people borrow money and their 412 00:24:56,160 --> 00:24:59,240 Speaker 1: house price goes down and they can't support repay the loan. 413 00:24:59,400 --> 00:25:03,239 Speaker 1: That's very e series. That's a different question altogether. UM, 414 00:25:03,560 --> 00:25:07,639 Speaker 1: you do still see prices is rising very sharply in 415 00:25:08,080 --> 00:25:12,080 Speaker 1: the US. That's partly because supply was actually somewhat limited 416 00:25:12,600 --> 00:25:18,400 Speaker 1: during the earlier stages of COVID, and because UM finance 417 00:25:18,720 --> 00:25:23,040 Speaker 1: became exceptionally cheap thanks to the thanks to the Fed's 418 00:25:23,080 --> 00:25:28,160 Speaker 1: monetary policy, which I think everybody now agrees stayed too 419 00:25:28,880 --> 00:25:32,440 Speaker 1: easy for too long with the benefit of hindsight, and 420 00:25:33,119 --> 00:25:36,439 Speaker 1: that did mean that a lot of people started looking 421 00:25:36,520 --> 00:25:40,920 Speaker 1: for for housing. The fact that the supply was relatively limited, 422 00:25:41,200 --> 00:25:44,520 Speaker 1: and that there was also the desire of some who 423 00:25:44,600 --> 00:25:47,400 Speaker 1: were living in cities to find somewhere else to move 424 00:25:48,160 --> 00:25:52,320 Speaker 1: meant that you really did have a perfect positive storm 425 00:25:52,480 --> 00:25:56,040 Speaker 1: from the point of view people who wanted to sell houses. UM. 426 00:25:57,720 --> 00:25:59,919 Speaker 1: You could make the argument in terms of how day 427 00:26:00,000 --> 00:26:06,080 Speaker 1: injurious that is now UM mortgage rates are you know, 428 00:26:06,200 --> 00:26:11,280 Speaker 1: have have had probably the biggest upward shock they've ever had, 429 00:26:11,640 --> 00:26:15,440 Speaker 1: bearing in mind how low they started. Yes, it's true. 430 00:26:15,720 --> 00:26:21,159 Speaker 1: Americans tend to have long term fixed mortgages. Many of 431 00:26:21,200 --> 00:26:24,200 Speaker 1: them were hoping to use their house as an a 432 00:26:24,320 --> 00:26:27,560 Speaker 1: t M, however, which isn't going to happen for a 433 00:26:27,640 --> 00:26:31,639 Speaker 1: long time at this point. And many were probably hoping 434 00:26:31,720 --> 00:26:36,280 Speaker 1: to refinance lower, which isn't going to happen. So there 435 00:26:36,320 --> 00:26:40,600 Speaker 1: are still very great concerns there. And actually we should 436 00:26:40,600 --> 00:26:42,400 Speaker 1: just say, I mean roughly how much. I mean they're 437 00:26:42,440 --> 00:26:47,399 Speaker 1: now back thirty year rates back to what around six 438 00:26:47,680 --> 00:26:50,160 Speaker 1: percent or something, So the change at the start from 439 00:26:50,160 --> 00:26:54,280 Speaker 1: the start of the year is pretty dramatic. Its Fortunately, 440 00:26:55,200 --> 00:26:58,240 Speaker 1: you know that the actual interest rates cost you need 441 00:26:58,440 --> 00:27:01,440 Speaker 1: to pay now compared taking out a mortgage six months 442 00:27:01,480 --> 00:27:05,800 Speaker 1: ago has multiplied several times over, so for people who 443 00:27:05,840 --> 00:27:08,240 Speaker 1: are thinking about their kind of monthly costs, even though 444 00:27:08,320 --> 00:27:11,200 Speaker 1: even though the sort of six percent doesn't seem that 445 00:27:11,440 --> 00:27:14,879 Speaker 1: much historically, it's a huge difference in your monthly payment 446 00:27:14,920 --> 00:27:18,399 Speaker 1: if you were rather over extending yourself potentially, yes, and 447 00:27:18,560 --> 00:27:20,520 Speaker 1: and and if a year ago you were doing the 448 00:27:20,600 --> 00:27:22,520 Speaker 1: math and thought that you were going to be paying two. 449 00:27:24,480 --> 00:27:30,200 Speaker 1: Then the whole proposition is transformed. And that is a 450 00:27:30,240 --> 00:27:34,720 Speaker 1: bigger shock, um than you know, there was ever he 451 00:27:34,800 --> 00:27:37,320 Speaker 1: suffered at any point during the seventies that kind of 452 00:27:37,520 --> 00:27:41,480 Speaker 1: speed of increase in in debt debt costs from a 453 00:27:41,520 --> 00:27:44,920 Speaker 1: low base. I mean. Moving on to commercial property, I 454 00:27:45,000 --> 00:27:48,960 Speaker 1: think that's where there is the really great concern because 455 00:27:49,680 --> 00:27:57,000 Speaker 1: two things. One supply is extreme. Um. I don't know 456 00:27:57,040 --> 00:27:59,000 Speaker 1: when you were started in Manhattan, but there are now 457 00:27:59,119 --> 00:28:02,600 Speaker 1: something like half a dozen buildings taller than the Empire State. 458 00:28:03,960 --> 00:28:09,280 Speaker 1: There's forests of new skyscrapers going up. Very beautiful views 459 00:28:09,320 --> 00:28:13,200 Speaker 1: from the higher floors of the Bloomberg Building. UM, very 460 00:28:13,359 --> 00:28:18,399 Speaker 1: hard to imagine. It strike me as optimistic even before 461 00:28:18,520 --> 00:28:22,119 Speaker 1: the pandemic. At this point, you know, I go to 462 00:28:22,280 --> 00:28:24,760 Speaker 1: work in the morning and I actually sit down in 463 00:28:24,840 --> 00:28:28,440 Speaker 1: the subway because so many fewer people are actually going 464 00:28:28,520 --> 00:28:31,680 Speaker 1: to work in an office, which is which, which is nice, 465 00:28:31,840 --> 00:28:35,800 Speaker 1: but you know, the and I then move into you know, 466 00:28:35,880 --> 00:28:39,120 Speaker 1: a central business district with vastly more capacity than had 467 00:28:39,160 --> 00:28:43,360 Speaker 1: before that that is really terrifying. Putting those things together. 468 00:28:43,520 --> 00:28:48,640 Speaker 1: The you know, your average real estate developer in this city. 469 00:28:48,920 --> 00:28:51,720 Speaker 1: These are guys who probably don't have thirty year financing. 470 00:28:51,800 --> 00:28:56,280 Speaker 1: They're probably they probably are trying to to borrow over 471 00:28:56,360 --> 00:29:01,320 Speaker 1: shorter terms and needing to roll over um. So the 472 00:29:01,440 --> 00:29:05,200 Speaker 1: one positive, the one reason we're not needn't be too 473 00:29:05,920 --> 00:29:08,040 Speaker 1: concerned about it, is that a lot of the money 474 00:29:08,480 --> 00:29:12,360 Speaker 1: for these guys ultimately comes from pension funds and endowments 475 00:29:12,400 --> 00:29:15,520 Speaker 1: and the kind of people who can afford to wait 476 00:29:15,640 --> 00:29:20,280 Speaker 1: out a storm that they've got a long term time horizon. 477 00:29:21,120 --> 00:29:23,640 Speaker 1: But not all of it does. And you know, we'd 478 00:29:23,760 --> 00:29:27,800 Speaker 1: rather not all of us sacrifice a bit of our 479 00:29:27,840 --> 00:29:32,000 Speaker 1: pension to deal with real estate. So cook from for 480 00:29:32,120 --> 00:29:36,120 Speaker 1: my money, commercial real estate is probably the single greatest 481 00:29:36,960 --> 00:29:40,120 Speaker 1: cause for concern. What I'm taking from from what you're 482 00:29:40,160 --> 00:29:44,080 Speaker 1: saying is that if we do see property triggering something 483 00:29:44,200 --> 00:29:49,080 Speaker 1: really significant for the economy, it's going to look and 484 00:29:49,240 --> 00:29:52,360 Speaker 1: feel very different from what we saw before the global 485 00:29:52,400 --> 00:29:54,840 Speaker 1: financial crisis, which was very much tied up into what 486 00:29:54,960 --> 00:29:58,120 Speaker 1: had happened to those to the to the lower end 487 00:29:58,200 --> 00:30:02,160 Speaker 1: housing market, with the assets attached to that sort of 488 00:30:02,200 --> 00:30:06,840 Speaker 1: subprime market having somehow infiltrated not just the US financial 489 00:30:06,920 --> 00:30:09,640 Speaker 1: system but the global financial system. This seems like the 490 00:30:09,720 --> 00:30:12,160 Speaker 1: sort of the complete opposite that you've got. It's actually 491 00:30:12,440 --> 00:30:14,160 Speaker 1: it's the it's a bit of real estate that probably 492 00:30:14,160 --> 00:30:18,080 Speaker 1: affects people least in their day to day um and 493 00:30:19,040 --> 00:30:22,160 Speaker 1: that's potentially the biggest trigger point. And indeed it could 494 00:30:22,240 --> 00:30:25,200 Speaker 1: be the other side of the world's property market that 495 00:30:25,360 --> 00:30:27,360 Speaker 1: this time is going to affect us. So let's just 496 00:30:27,600 --> 00:30:30,280 Speaker 1: maybe come back to what you said about China. You know, 497 00:30:30,840 --> 00:30:35,960 Speaker 1: famously US subprime kind of set off this global sort 498 00:30:36,000 --> 00:30:41,480 Speaker 1: of financial explosion in the two thousand and seven eight? 499 00:30:42,440 --> 00:30:45,720 Speaker 1: Are we about to see China's property market now do 500 00:30:45,880 --> 00:30:47,520 Speaker 1: the same to the rest of the world. I mean, 501 00:30:47,560 --> 00:30:50,120 Speaker 1: how how serious do you see that threat? I do 502 00:30:50,360 --> 00:30:54,520 Speaker 1: see it as serious? Um uh. I mean, as ever, 503 00:30:54,640 --> 00:30:57,080 Speaker 1: when you're making comparisons to two thousands and seven, it's 504 00:30:57,120 --> 00:30:59,880 Speaker 1: like making comparisons to Hitler when you're talking about politics. 505 00:31:00,240 --> 00:31:03,480 Speaker 1: Um do I am I predicting that it's going to 506 00:31:03,600 --> 00:31:07,640 Speaker 1: be as bad as that? No, not necessarily. Is it 507 00:31:07,680 --> 00:31:12,360 Speaker 1: conceptually something similar that could be very bad? Yes, you 508 00:31:12,520 --> 00:31:15,400 Speaker 1: do have which you didn't have in the States. You 509 00:31:15,520 --> 00:31:20,800 Speaker 1: have had several years of the Chinese authorities trying to 510 00:31:22,000 --> 00:31:25,520 Speaker 1: deal with the issue. The reason the big property developers 511 00:31:25,600 --> 00:31:29,240 Speaker 1: got into trouble last year is because China was trying 512 00:31:29,360 --> 00:31:35,280 Speaker 1: to rain them in um. But yes, that that has 513 00:31:35,320 --> 00:31:38,120 Speaker 1: been an important engine of China's growth. In China's growth 514 00:31:38,160 --> 00:31:42,080 Speaker 1: has been vital to the rest of the world. So 515 00:31:42,360 --> 00:31:46,280 Speaker 1: it's it's a difference, it's it's rooted in the same 516 00:31:46,400 --> 00:31:51,880 Speaker 1: ultimate problem that everybody needs property, that it tends to 517 00:31:51,960 --> 00:31:55,640 Speaker 1: be a leveraged investment, and that when it goes, when 518 00:31:55,720 --> 00:32:00,520 Speaker 1: things go wrong, it's a really serious issue. But you're right, then, 519 00:32:00,880 --> 00:32:02,720 Speaker 1: I don't think they're going to make the same mistakes 520 00:32:03,040 --> 00:32:05,560 Speaker 1: as the US. Did you know seven? The US hasn't 521 00:32:05,600 --> 00:32:07,480 Speaker 1: made the same mistakes as in No. Seven or eight. 522 00:32:08,440 --> 00:32:12,000 Speaker 1: They have at least made new mistakes. But the theories 523 00:32:12,040 --> 00:32:14,720 Speaker 1: whether how big, how serious the new mistake will be, 524 00:32:15,360 --> 00:32:17,400 Speaker 1: And as we heard earlier, actually it's not been it's 525 00:32:17,440 --> 00:32:19,760 Speaker 1: been the lower income people that have actually been locked 526 00:32:19,800 --> 00:32:22,440 Speaker 1: out of many of the new mortgages. But that also 527 00:32:22,520 --> 00:32:24,720 Speaker 1: suggests that maybe there's a bit more tolerance in the 528 00:32:24,920 --> 00:32:28,600 Speaker 1: property market, the sort of residential property market, because it's 529 00:32:28,680 --> 00:32:31,520 Speaker 1: not people who are right on living hand to mouth 530 00:32:31,560 --> 00:32:33,560 Speaker 1: who are who are dealing with these higher rates. You 531 00:32:33,640 --> 00:32:35,480 Speaker 1: and I, who have spent so long looking at the 532 00:32:35,520 --> 00:32:38,360 Speaker 1: global economy and the global nacial system in various ways. 533 00:32:38,840 --> 00:32:41,840 Speaker 1: You look at property and it just seems of all 534 00:32:41,920 --> 00:32:48,440 Speaker 1: the assets that we have uniquely divisive between generations, between 535 00:32:48,800 --> 00:32:52,560 Speaker 1: lower and higher income, that it sets up these problems 536 00:32:52,640 --> 00:32:54,440 Speaker 1: for young people not being able to afford to get 537 00:32:54,480 --> 00:32:57,040 Speaker 1: in the housing ladder. It's very lumpy as an asset, 538 00:32:57,120 --> 00:33:01,160 Speaker 1: it's extremely passy to buy and sell, how very prone 539 00:33:01,200 --> 00:33:04,960 Speaker 1: to booms and bust, and it's not a productive place 540 00:33:05,240 --> 00:33:07,840 Speaker 1: to invest when you think about the broader economy. Much 541 00:33:07,880 --> 00:33:11,760 Speaker 1: better to have money invested in a in in creating 542 00:33:11,920 --> 00:33:15,200 Speaker 1: jobs and a going concern a company, rather than just 543 00:33:15,320 --> 00:33:18,680 Speaker 1: tied up in a in a lump of bricks and mortar. 544 00:33:19,040 --> 00:33:21,120 Speaker 1: So why have we ended up having so much of 545 00:33:21,160 --> 00:33:23,400 Speaker 1: the world's wealth tied up in such a bad place. 546 00:33:25,000 --> 00:33:31,000 Speaker 1: It's very good, very profound question. I would say partly 547 00:33:31,360 --> 00:33:35,640 Speaker 1: it's because you can borrow easily to do it, and 548 00:33:35,960 --> 00:33:39,320 Speaker 1: people will always that you've if you've got a house 549 00:33:39,440 --> 00:33:42,000 Speaker 1: as security for a loan, you can borrow much more 550 00:33:42,040 --> 00:33:43,800 Speaker 1: easily and much more cheaply than in many other ways. 551 00:33:43,840 --> 00:33:48,240 Speaker 1: So that's a big part of it. I think you're 552 00:33:48,320 --> 00:33:51,400 Speaker 1: right that the sense of status that comes with it 553 00:33:51,920 --> 00:33:56,720 Speaker 1: the sense that's not necessarily economically rational that you want 554 00:33:56,880 --> 00:33:59,280 Speaker 1: to have a house, that you want to have your 555 00:33:59,360 --> 00:34:03,040 Speaker 1: parts on housing ladder. That's a phrase that the British 556 00:34:03,800 --> 00:34:09,400 Speaker 1: use all the time. Is very is very central. UM. 557 00:34:10,800 --> 00:34:13,600 Speaker 1: What worries me most in terms of what you were 558 00:34:13,680 --> 00:34:15,560 Speaker 1: just saying, is that there is a there is indeed 559 00:34:15,640 --> 00:34:22,520 Speaker 1: a very serious generational issue to this. UM. Younger people 560 00:34:23,239 --> 00:34:26,440 Speaker 1: like in their twenties and early thirties, in my experience, 561 00:34:26,680 --> 00:34:31,719 Speaker 1: really wants to own real estate because in part they 562 00:34:31,880 --> 00:34:36,200 Speaker 1: can't and they feel they're missing out, and you know 563 00:34:36,480 --> 00:34:39,120 Speaker 1: they are. I've got plenty of friends in their early 564 00:34:39,200 --> 00:34:44,320 Speaker 1: thirties starting families still renting UM, and that doesn't that 565 00:34:44,520 --> 00:34:48,759 Speaker 1: feels at a psychological level, that doesn't feel comfortable. UM. 566 00:34:49,560 --> 00:34:54,080 Speaker 1: The way the housing market has developed, certainly the two 567 00:34:54,120 --> 00:34:56,400 Speaker 1: countries I know best, the UK and the US, there 568 00:34:56,560 --> 00:35:04,960 Speaker 1: is really a very nasty, sharp generational evidem which intensifies 569 00:35:06,160 --> 00:35:08,440 Speaker 1: the sense of inequality, of the sense of injustice that 570 00:35:08,719 --> 00:35:13,120 Speaker 1: we all know is poisoning much of the developed West 571 00:35:13,680 --> 00:35:18,800 Speaker 1: at present. UM. So I suppose, coming back to your question, 572 00:35:18,880 --> 00:35:21,800 Speaker 1: that's that's how I would answered it. Partly, it's what 573 00:35:21,960 --> 00:35:24,040 Speaker 1: we can all borrow for and it's always easier to 574 00:35:24,880 --> 00:35:29,000 Speaker 1: buy something if you can borrow, but it's also that 575 00:35:29,200 --> 00:35:31,600 Speaker 1: you do need it, and that it comes with this 576 00:35:32,400 --> 00:35:38,520 Speaker 1: immense psychologically important sense of status. And it matters to 577 00:35:38,640 --> 00:35:41,520 Speaker 1: people that if you if you, if you are renting 578 00:35:41,560 --> 00:35:47,320 Speaker 1: in your thirties, you feel somewhat more of a of 579 00:35:47,400 --> 00:35:50,799 Speaker 1: a rootless person, less of a stake somehow or other 580 00:35:51,000 --> 00:35:55,319 Speaker 1: than if you've already got a house and a mortgage. UM. 581 00:35:55,840 --> 00:36:02,800 Speaker 1: Whether that's sensible, whether that's economically rational, is probably a 582 00:36:02,880 --> 00:36:06,520 Speaker 1: topic you could spend another entire podcast on, But there's 583 00:36:06,560 --> 00:36:12,880 Speaker 1: no question people feel uncomfortable not having having property by 584 00:36:12,960 --> 00:36:16,440 Speaker 1: a certain age, and in the current situation where they 585 00:36:16,480 --> 00:36:21,799 Speaker 1: can't UM that leads to very serious tensions. And whether 586 00:36:21,960 --> 00:36:23,880 Speaker 1: or not we see a big boom and bust in 587 00:36:23,920 --> 00:36:26,800 Speaker 1: the property market in the next year or so, it 588 00:36:26,880 --> 00:36:29,800 Speaker 1: certainly feels like something we're setting up problems for the future. 589 00:36:30,440 --> 00:36:42,719 Speaker 1: John Author's thank you very much, thank you. Well, that's 590 00:36:42,760 --> 00:36:44,840 Speaker 1: it for this episode of Stephonomics. We'll be back in 591 00:36:44,920 --> 00:36:47,719 Speaker 1: the autumn. They look out for bonus episodes if I 592 00:36:47,800 --> 00:36:50,440 Speaker 1: meet anyone exciting on my travels, and do be sure 593 00:36:50,480 --> 00:36:53,800 Speaker 1: to check out the Bloomberg news website Bloomberg UK in Britain. 594 00:36:54,160 --> 00:36:56,840 Speaker 1: For more economic news and views on the global economy, 595 00:36:57,120 --> 00:37:01,120 Speaker 1: you should also follow at economics on Twitter. So This 596 00:37:01,239 --> 00:37:05,240 Speaker 1: episode was produced by Magnus Hendrickson and Sammer Sadi. Special 597 00:37:05,280 --> 00:37:09,040 Speaker 1: thanks also to Maria Paulo, Michelis Dorris, John Lle Marte, 598 00:37:09,800 --> 00:37:14,080 Speaker 1: Gilda de Carli Blake, Maple's, John Author's and Nera Sharp. 599 00:37:14,640 --> 00:37:36,480 Speaker 1: Mike Sasso is the executive producer of Stephanomics. M