WEBVTT - The Housing Slowdown Could Become a Global Meltdown 0:00:07.600 --> 0:00:09.920 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:09.920 --> 0:00:12.920 global economy to you. And in this last episode of 0:00:13.000 --> 0:00:16.239 the series, we have to talk about housing. Where we 0:00:16.320 --> 0:00:18.599 live is often a big part of who we are. 0:00:18.920 --> 0:00:21.440 If we're lucky, it's also our main source of wealth, 0:00:21.600 --> 0:00:25.960 quite possibly our retirement plan. But for many many others, 0:00:26.280 --> 0:00:29.160 finding and keeping a home it's what keeps them living 0:00:29.200 --> 0:00:32.600 on the edge, a constant financial burden and source of stress. 0:00:33.280 --> 0:00:35.800 And because it does play such a big role in 0:00:35.920 --> 0:00:40.600 all our lives, property as also historically played an outsized 0:00:40.680 --> 0:00:42.960 role in the ups and downs of the economy. In 0:00:42.960 --> 0:00:44.839 a little while, I'll be taking a quick tour of 0:00:44.880 --> 0:00:48.120 the world's property markets with Bloomberg economist near Our Shah, 0:00:48.600 --> 0:00:52.880 warming up for an expansive, even philosophical conversation with Bloomberg 0:00:53.000 --> 0:00:56.800 Star columnist John Authors, asking why it is that real 0:00:56.920 --> 0:01:00.280 estate causes us so much trouble and which of theollowing 0:01:00.640 --> 0:01:02.960 are most likely to blow up the global economy, this 0:01:03.000 --> 0:01:07.120 time around bankrupt property developers in New York or China. 0:01:08.000 --> 0:01:12.600 But first, US economy reporter Maria Paula Micharris Doris has 0:01:12.680 --> 0:01:16.920 this ground level view of the increasingly cutthroat market for 0:01:17.080 --> 0:01:21.759 US rentals, where suppliers tight and costs for even long 0:01:21.840 --> 0:01:37.119 time renters are soaring despite whether the rents go up 0:01:37.200 --> 0:01:41.319 or not. I can't afford anything until I get some 0:01:41.440 --> 0:01:44.960 help from the government with disability from solving secured so 0:01:45.080 --> 0:01:47.360 that the story is, yes, we have higher rent and 0:01:47.440 --> 0:01:50.800 now the higher rents are now backering in my ability 0:01:50.800 --> 0:01:55.600 to rent an apartment in my busical condition because the 0:01:55.680 --> 0:01:58.920 rents are higher. Deny Keiner had a plan to deal 0:01:59.040 --> 0:02:01.640 with the big increase in the monthly rent for his 0:02:01.760 --> 0:02:05.080 as big as apartment to spring. You figure he would 0:02:05.080 --> 0:02:08.720 just take extra ships at his pretending job on the strip. 0:02:09.600 --> 0:02:14.440 Then life intervened a diagnosis of pancreatic cancer and made 0:02:14.480 --> 0:02:17.800 it hard for him to move, let alone work, and 0:02:17.880 --> 0:02:22.760 he lost his job. Now he's facing eviction. I don't 0:02:22.800 --> 0:02:27.160 have enough strength. I'm physically able to walk around like 0:02:27.360 --> 0:02:30.560 a regular person. I can walk maybe a quarter mile 0:02:30.600 --> 0:02:34.800 and then I'm done physically. So the question at some 0:02:34.880 --> 0:02:38.000 point in my life, this terminal disease will kick in 0:02:38.760 --> 0:02:42.520 to where I can't do anything like even work from 0:02:42.520 --> 0:02:47.080 a laptop. Cannery is among the eight point four million 0:02:47.120 --> 0:02:50.560 Americans who are laid on rent payments as prices continue 0:02:50.600 --> 0:02:53.200 to increase. According to data by the U S and 0:02:53.240 --> 0:02:59.280 SIS Bureau, that is of o U S renters. As 0:02:59.360 --> 0:03:03.240 rental cut sore across the country, Americans are struggling to 0:03:03.320 --> 0:03:07.600 keep up. Single family rents grows by a record of 0:03:07.639 --> 0:03:12.320 fourteen percent nationally over the past year, according to core Logic, 0:03:12.760 --> 0:03:16.240 a real state data firm, But the increases were even 0:03:16.280 --> 0:03:19.760 more dramatic in cities that became popular living destinations during 0:03:19.800 --> 0:03:23.880 the pandemic, including a four one percent increase in Miami, 0:03:24.720 --> 0:03:28.280 a twenties six percent rise in Orlando, and an eighteen 0:03:28.320 --> 0:03:32.200 percent jump in Phoenix. Some tenants are seeing their mostly 0:03:32.200 --> 0:03:36.160 rent bills rise by several hundred dollars even after years 0:03:36.280 --> 0:03:40.240 of living in the same apartment. The government block landlords 0:03:40.400 --> 0:03:43.440 from a big tim many people during the pandemic, but 0:03:43.560 --> 0:03:48.160 those moratoriums are ending, so too are many emergency rental 0:03:48.160 --> 0:03:53.200 assistance programs. Now there's a very real chance many Americans 0:03:53.240 --> 0:03:56.520 could be forced out of their homes. It's pretty much 0:03:56.520 --> 0:04:00.880 the perfect storm for renters right now. That was Kate Reynolds, 0:04:01.040 --> 0:04:05.160 principal policy associated at the Washington based Urban Institute. So 0:04:05.200 --> 0:04:08.840 emergency rental release was authorized as a response to the 0:04:08.840 --> 0:04:12.360 pandemic a total of forty seven billion dollars. And these 0:04:12.400 --> 0:04:16.640 were authorized back at the beginning of What we're seeing 0:04:16.640 --> 0:04:18.760 now is that a lot of that funding has been 0:04:18.800 --> 0:04:22.680 spent down and those renters and and their landlords are 0:04:22.800 --> 0:04:24.560 you know, don't have a place to turn if they're 0:04:24.600 --> 0:04:27.279 unable to pay the rent. She says that for the 0:04:27.360 --> 0:04:30.560 first time since the pandemic began, an increasing number of 0:04:30.600 --> 0:04:34.560 Americans are on their own to COVID strowing housing costs 0:04:35.520 --> 0:04:40.400 during the pandemic. Combination of national, state and local moratoriums 0:04:40.600 --> 0:04:43.320 you have a lifeline to millions of Americans thrown out 0:04:43.320 --> 0:04:46.799 of work or forced to stay home to care for children. 0:04:48.040 --> 0:04:52.280 Starting in March, the Federal Cares Act put in the 0:04:52.320 --> 0:04:56.440 initial one d twenty day ban on evictions that covered 0:04:56.800 --> 0:04:59.480 as many as forty five percent of U S renters 0:05:00.000 --> 0:05:04.760 according to Urban Insitute estimates. That was followed up by 0:05:04.760 --> 0:05:09.200 a sweeping moratorium imposed by the Federal Centers for the 0:05:09.320 --> 0:05:14.240 c Control and Prevention, which covered millions more American throughout 0:05:14.279 --> 0:05:21.120 parts of However, by August of last year, the US 0:05:21.120 --> 0:05:24.320 Supreme Court struck down the federal moratorium and in art 0:05:24.360 --> 0:05:29.560 evictions to RACEUME. So for the first time ever UM 0:05:29.640 --> 0:05:33.720 in June, we saw median rant prices go above two 0:05:34.160 --> 0:05:38.560 thousand dollars a month, and you have inflation on essentials 0:05:38.680 --> 0:05:42.159 like gas, food and groceries as well as energy costs. 0:05:42.400 --> 0:05:45.440 And then on top of all of that, eviction moratoria 0:05:45.480 --> 0:05:50.880 were also extended during the pandemic, both by Congress and 0:05:51.279 --> 0:05:55.840 by UM. The Centers for Disease Control and Prevention, and 0:05:56.400 --> 0:06:01.280 some local places also had policies and eas. All of 0:06:01.360 --> 0:06:06.040 those have expired. There's a few local exceptions. But what 0:06:06.200 --> 0:06:08.960 we did see is that UM, during the time that 0:06:09.080 --> 0:06:13.360 those eviction moratory were in place, that eviction filings really 0:06:13.440 --> 0:06:17.160 did stay below average levels. And so all of these 0:06:17.240 --> 0:06:20.560 things are sort of happening at the same time, which 0:06:22.320 --> 0:06:25.479 is really difficult for a lot of friends or households. 0:06:25.920 --> 0:06:30.560 There is a great research study out of California that 0:06:30.960 --> 0:06:35.440 came out, you know, mid in mid crisis UM, that 0:06:35.560 --> 0:06:38.440 basically showed that a lot of renter households had what 0:06:38.640 --> 0:06:43.240 we call shadow debts UM, so renters were taking on 0:06:43.960 --> 0:06:46.000 debt in order to pay their rent because you know, 0:06:46.120 --> 0:06:50.800 folks worry about UM, you know, in eviction filing or 0:06:50.880 --> 0:06:53.160 losing their housing and so a lot of times we've 0:06:53.240 --> 0:06:56.320 seen that. UM. What we say sometimes is that the 0:06:56.400 --> 0:07:01.160 rent eats first, UM. And what that means is that folks, uh, 0:07:01.720 --> 0:07:04.160 you know, put money their money towards rents, even if 0:07:04.240 --> 0:07:08.240 it means that they can't, you know, buy groceries, even 0:07:08.320 --> 0:07:12.239 when someone isn't facing eviction. A shortage of available housing 0:07:12.400 --> 0:07:15.160 and a search of people moving to warmer climates has 0:07:15.240 --> 0:07:19.600 given landlords an advantage over their tenants. In many cases, 0:07:19.840 --> 0:07:22.960 then there's are boosting rents by hundreds of dollars and 0:07:23.080 --> 0:07:27.760 renters have those choice but to pay for it. Last Yanuary, 0:07:28.040 --> 0:07:30.760 Carlia Kelly was unable to renew the lease of the 0:07:30.840 --> 0:07:33.920 two bedroom apartment where she has lived since the thousand 0:07:34.080 --> 0:07:38.080 nine in the Atlanta suburb of Duluth, Georgia. People from 0:07:38.120 --> 0:07:42.320 the northeastern California were higher than here. They think george 0:07:42.480 --> 0:07:46.160 is less expensive and where people can work remotely from 0:07:46.200 --> 0:07:48.880 a number of jobs. Now they don't necessarily have to 0:07:48.960 --> 0:07:52.080 be where their company is headquartered. So we do have 0:07:52.200 --> 0:07:55.800 a big influx of people from the Northeast and from 0:07:55.880 --> 0:07:59.360 California moving to Georgia. So there was that thing shortage 0:07:59.400 --> 0:08:03.120 of a part the company that owned the building decided 0:08:03.160 --> 0:08:06.440 to the renovations that could accommodate new residents who moved 0:08:06.480 --> 0:08:08.960 from more expensive cities and are willing to pay more 0:08:09.080 --> 0:08:12.320 for rent. The landlord offered her a space in another 0:08:12.400 --> 0:08:15.840 of its buildings, bosting her rent by almost six hundred 0:08:15.880 --> 0:08:18.280 dollars a month. And the night I got the keys, 0:08:18.440 --> 0:08:22.680 there were cockroaches running all around the apartment. That was like, 0:08:22.920 --> 0:08:27.240 pictures were rusted. Light coaches didn't work. Carpeting in the 0:08:27.320 --> 0:08:31.560 bedrooms was old, um thoughts that didn't work. I mean, 0:08:31.640 --> 0:08:34.079 there was just a whole list of stuff. The parments 0:08:34.080 --> 0:08:38.240 builder hadn't been changed. Um, it was just it was horrible. 0:08:40.200 --> 0:08:43.400 Back in Las Vegas, Keener's rent went from seven hundred 0:08:43.520 --> 0:08:46.640 fifty to one thousand dollars for our one bedroom, one 0:08:46.720 --> 0:08:51.320 bathroom apartment. That might sound cheap for New Yorkers and Californians, 0:08:51.640 --> 0:08:55.679 but very expensive for people in Las Vegas. Unable to 0:08:55.760 --> 0:08:59.960 work and facing possible eviction. He's hoping to win financial 0:09:00.000 --> 0:09:04.040 assistance from a government program that helps low income Americans 0:09:04.080 --> 0:09:08.920 with housing costs. However, his application has been tied up 0:09:09.000 --> 0:09:12.920 for months. The money is they opened the federal government 0:09:13.320 --> 0:09:16.120 and needs to corps, to these very i agencies. But 0:09:16.360 --> 0:09:19.360 there's so many people applying for this, but they've called 0:09:19.559 --> 0:09:22.240 created a weights so I can even apply for the 0:09:22.320 --> 0:09:25.200 month with the help of a lawyer. He's doing an 0:09:25.240 --> 0:09:28.120 eviction appeal to buy more time before he has nowhere 0:09:28.120 --> 0:09:32.280 else to go. As we speak, he's backing his belongings 0:09:32.320 --> 0:09:35.240 into storage to be pretty moved to a homeless shelter 0:09:35.880 --> 0:09:41.160 whenever he gets evicted. For Bloomberg News, this is Mariab Stories. 0:09:46.400 --> 0:09:49.600 I wanted to start with that piece because conversations about 0:09:49.640 --> 0:09:52.240 property so often revolve around what's going to happen to 0:09:52.320 --> 0:09:55.599 house prices and mortgage rates. We talked less about the 0:09:55.640 --> 0:09:58.240 consequences of those things for a renter just looking for 0:09:58.320 --> 0:10:02.000 somewhere affordable to live. But super low mortgage rates are 0:10:02.080 --> 0:10:05.200 one reason why property prices and rents have been going 0:10:05.400 --> 0:10:08.240 up and up around the world in recent years, and 0:10:08.400 --> 0:10:10.439 especially if you live in the US or the UK. 0:10:11.120 --> 0:10:13.760 You'll know that the property boom didn't let up during 0:10:13.800 --> 0:10:18.520 the pandemic. If anything, it accelerated. So now mortgage rates 0:10:18.600 --> 0:10:21.160 are finally heading up in many countries. You have to 0:10:21.240 --> 0:10:25.240 wonder which property market will pop first, and what the 0:10:25.320 --> 0:10:28.680 collateral damage will be our UK economists. Near Our Shah 0:10:28.760 --> 0:10:31.400 has been looking at a series of indicators for nineteen 0:10:31.520 --> 0:10:34.680 property markets around the world. Has some answers to that question. 0:10:35.200 --> 0:10:37.559 Near Ash, thank you very much for doing this, Thank 0:10:37.640 --> 0:10:39.800 you for having me on, Stephanie. So we should cut 0:10:39.840 --> 0:10:42.040 to the chase. Everyone wants to know whether they're sitting 0:10:42.080 --> 0:10:43.960 in a place that's about to blow up. So which 0:10:44.040 --> 0:10:48.160 countries came top in our in our rankings as places 0:10:48.240 --> 0:10:51.880 to watch? So New Zealand camp top, but Australian Cannedy 0:10:51.960 --> 0:10:54.439 were up there as well, and all of those countries 0:10:54.480 --> 0:10:57.960 are showing now signs of cooling. The more striking thing 0:10:58.200 --> 0:11:01.880 is Toronto, where as you've seen quite dramatic price falls, 0:11:02.400 --> 0:11:04.319 and so that's something to watch out having had big 0:11:04.400 --> 0:11:08.719 house price rises for a long indeed exactly exactly. But 0:11:08.840 --> 0:11:11.800 the other places a Czech Republic is well up there 0:11:12.480 --> 0:11:16.200 from the European Union, but also Portugal within the UR Area. 0:11:16.520 --> 0:11:18.959 Now both those are not actually sharing signs of cooling 0:11:19.120 --> 0:11:21.400 as yet, and so but something to want to look 0:11:21.400 --> 0:11:25.679 out for, especially as the ECB starts raising rates from 0:11:25.800 --> 0:11:28.640 this month and possibly by fifty basis points in September. 0:11:29.040 --> 0:11:31.960 It's interesting because a lot of the countries that we mentioned, 0:11:32.120 --> 0:11:35.000 certainly Australia and Canada, are actually countries that kind of 0:11:35.200 --> 0:11:39.120 didn't have a housing market crash in the global financial crisis. 0:11:39.200 --> 0:11:41.160 They sort of dodged that bullet. But it also meant 0:11:41.240 --> 0:11:43.160 that prizes were able to just keep going up and 0:11:43.280 --> 0:11:46.480 up and up and up, and they get even less affordable. 0:11:46.960 --> 0:11:49.360 There is a lot of focus on America, given that 0:11:49.520 --> 0:11:51.400 it was the U s sub prime market that played 0:11:51.440 --> 0:11:53.960 such a big role in triggering that global financial crisis 0:11:54.000 --> 0:11:56.360 in two thousand and eight. Actually, there was a fascinating 0:11:56.520 --> 0:11:59.439 statistic that the Deputy Governor of the Bank of England 0:11:59.480 --> 0:12:02.280 then broad been calculated at the time. I remember he 0:12:02.400 --> 0:12:05.520 calculated that UK banks had lost a lot more money 0:12:05.600 --> 0:12:10.680 on US subprime assets going into that crisis than they 0:12:10.720 --> 0:12:14.360 ever did on the UK housing market. So people are 0:12:14.400 --> 0:12:17.040 looking again at the US and saying, could this now 0:12:17.800 --> 0:12:21.240 cause another global problem? Is it in a stronger position 0:12:21.280 --> 0:12:23.360 now than it was then? Well, you absolutely right to 0:12:23.600 --> 0:12:26.400 focus on the US. It is actually up there within 0:12:26.559 --> 0:12:29.120 what the country to look out for, um, But it 0:12:29.320 --> 0:12:32.040 is actually in a much stronger position than in two 0:12:32.080 --> 0:12:35.199 thousand and eight, and I think it's not only just 0:12:35.520 --> 0:12:39.400 tight lending standards than they were during the subprime crisis, 0:12:40.320 --> 0:12:42.600 it's also the quality of buyer and what I mean 0:12:42.720 --> 0:12:46.480 by that the last cycle, anyone could practically by get 0:12:46.559 --> 0:12:49.720 a mortgage. This time, it's been quite difficult for those 0:12:49.880 --> 0:12:52.280 on more wonderable incomes and so on to get a mortgage. 0:12:52.520 --> 0:12:54.880 So we already on a stronger platform in that sense. 0:12:55.320 --> 0:12:57.760 Sean Donald, who is often on this program, he had 0:12:57.760 --> 0:13:01.000 done some fascinating analysis of nicely that point. On the 0:13:01.080 --> 0:13:03.480 other from the other direction, that actually that it was 0:13:04.000 --> 0:13:06.880 many African American households who weren't particularly poor we're being 0:13:06.960 --> 0:13:08.880 shut out of the lending boom and the sort of 0:13:08.960 --> 0:13:11.079 mortgages that you've seen over the last few years in 0:13:11.080 --> 0:13:15.160 the US. I mean more broadly, households do seem to 0:13:15.200 --> 0:13:17.280 be in stronger shape. You know, we talk about the 0:13:17.360 --> 0:13:20.520 cash that's built up in different countries in the US 0:13:20.600 --> 0:13:24.000 and the UK from the COVID crisis. People still have 0:13:24.080 --> 0:13:26.480 a bit of extra cash in their bank accounts. Um 0:13:26.960 --> 0:13:30.120 in most cases you also have a fixed rate mortgage. 0:13:30.240 --> 0:13:32.800 So when the European Central Bank or the Bank of 0:13:32.840 --> 0:13:36.319 England raises interest rates or the FED, that doesn't immediately 0:13:36.400 --> 0:13:41.559 affect your the cost of your of your mortgage right then, absolutely. 0:13:41.760 --> 0:13:44.240 But when you talk about fixed rates, and the US 0:13:44.280 --> 0:13:46.520 has always been one of those countries where you used 0:13:46.520 --> 0:13:48.880 to have ten thirty years do make the average the 0:13:48.960 --> 0:13:50.839 normal to get a thirty year fixed rate, which I 0:13:50.880 --> 0:13:53.040 thought was incredible when I lived at the stakes, But 0:13:53.160 --> 0:13:56.079 globally now that has been going and so the UK 0:13:56.679 --> 0:14:00.079 you have eight actually over eighty percent of people on 0:14:00.200 --> 0:14:03.360 fixed rates, and significant of those are not going to 0:14:03.440 --> 0:14:06.160 be renewing them until two years time in the line, 0:14:06.320 --> 0:14:08.520 so they've got that breathing space to adjust and doubt 0:14:08.760 --> 0:14:10.559 you point out, and in the piece that you've written, 0:14:10.559 --> 0:14:13.640 you point out the house prices are record high globally. 0:14:13.679 --> 0:14:16.959 There's an International Monetary Fund Global House Price Index which 0:14:17.000 --> 0:14:19.080 is higher now even than it was before the last 0:14:20.000 --> 0:14:23.440 the last crash. And we know in the US and 0:14:23.560 --> 0:14:26.760 in UK and Europe it's a constant source of discussion 0:14:26.840 --> 0:14:29.880 how difficult it is for young people to get on 0:14:29.960 --> 0:14:33.720 the housing ladder to buy houses. Um. Yet you know, 0:14:33.840 --> 0:14:36.920 when government's tried to address this, the last thing that 0:14:37.040 --> 0:14:39.280 they would appeal to is the idea of actually a 0:14:39.400 --> 0:14:41.560 fall in house prices that would be the most direct 0:14:41.680 --> 0:14:45.040 way of making houses more affordable um and instead they 0:14:45.160 --> 0:14:48.680 have ways to coax people into buying houses and having 0:14:48.800 --> 0:14:50.840 less and needing less and less money to buy a house. 0:14:51.120 --> 0:14:54.840 We won't go into our respective ages, but you will 0:14:54.880 --> 0:14:57.720 have I'm sure lots of friends who have faced this issue, 0:14:57.760 --> 0:15:00.640 even with quite well paid jobs in in the UK 0:15:00.840 --> 0:15:03.400 and in London. Is it just that the people who 0:15:03.480 --> 0:15:06.040 have all the houses sit on now all this housing 0:15:06.320 --> 0:15:09.960 value and vote a lot more regularly than the young 0:15:10.080 --> 0:15:13.280 people that are struggling to get at home. It's quite 0:15:13.280 --> 0:15:15.520 an interesting thing, isn't it, Where the people who are 0:15:15.520 --> 0:15:17.480 on the housing ladder and so on are the ones 0:15:17.520 --> 0:15:20.960 who tend to vote the most. And the other sort 0:15:20.960 --> 0:15:23.480 of interesting thing on this is going back to how 0:15:24.880 --> 0:15:28.360 most the first time the UK in many decades, you've 0:15:28.400 --> 0:15:32.640 got more people who own their home outright then have mortgages. 0:15:32.880 --> 0:15:36.880 The government is quite aware of all this so sort 0:15:36.880 --> 0:15:38.880 of gives these trinkets of little things that we're doing 0:15:38.920 --> 0:15:40.880 something to get to you on the ladder. But home 0:15:40.920 --> 0:15:45.320 ownership has gone significantly down for those on the lowest 0:15:45.880 --> 0:15:50.680 income groups and young age people. Basically it's halved of 0:15:50.760 --> 0:15:54.000 the last I think fifteen years. And that's you know, 0:15:54.080 --> 0:15:57.120 that's quite a shocking really with you and your friends 0:15:57.200 --> 0:15:59.440 sort of you know, more or less starting out in 0:15:59.480 --> 0:16:02.160 the in the working force, or quite early in your careers. 0:16:02.480 --> 0:16:04.360 If you opened, if you if you turn on the 0:16:04.400 --> 0:16:06.720 TV tonight and they said house prices early on a 0:16:06.800 --> 0:16:10.040 four by ten percent or trying to strip out the 0:16:10.080 --> 0:16:12.080 fact that you're an economist, and you would worry about 0:16:12.080 --> 0:16:14.160 all the consequences. But just among your friends, I think 0:16:14.160 --> 0:16:16.120 they would think it was good news. I can definitely 0:16:16.160 --> 0:16:17.480 match for a few of my friends, they would be 0:16:17.480 --> 0:16:21.120 absolutely celebrating. They do wish there's their house and crash. 0:16:21.240 --> 0:16:23.680 I s this is about time, and they do resent 0:16:25.360 --> 0:16:28.720 all the enormous blenks that governments try and go to 0:16:28.880 --> 0:16:31.960 to prevent one. But again, this is the thing governments. 0:16:32.200 --> 0:16:35.080 If if there is a housing crash, there would be 0:16:35.400 --> 0:16:38.240 financial stability would be quite profound. You could have a 0:16:38.360 --> 0:16:40.400 far deeper recession and so on. So would actould be 0:16:40.440 --> 0:16:43.040 worsel for everyone. Sure that's what you say to your 0:16:43.080 --> 0:16:45.560 friends when they say, what a great thing it would be. 0:16:46.720 --> 0:16:56.880 Thank you very much, thank you very much. I'm delighted 0:16:57.000 --> 0:17:00.440 now to be drawing all the strands together with one 0:17:00.480 --> 0:17:03.760 of the stars in the world of financial journalism, John Authors, 0:17:04.119 --> 0:17:06.480 for many, many years one of the most read columnists 0:17:06.520 --> 0:17:08.760 for the Financial Times. In fact, we overlapped a little 0:17:08.800 --> 0:17:12.680 bit at the Ft and now definitely the most read 0:17:12.720 --> 0:17:16.480 columnists on finance and markets for Bloomberg. And John thank 0:17:16.560 --> 0:17:18.840 you so much for taking time to be part of 0:17:18.920 --> 0:17:22.040 our season finale. Well, thank you very much for that 0:17:22.280 --> 0:17:26.760 very kind introduction. Yes, it's good to be working together again, 0:17:27.000 --> 0:17:29.480 and appropriately given what we're going to talk about, your 0:17:29.520 --> 0:17:32.000 sitting and you're talking to us from from New York, 0:17:32.480 --> 0:17:34.960 and I wanted to focus on property in this episode, 0:17:35.080 --> 0:17:38.080 not only because the cost of housing affects all of 0:17:38.200 --> 0:17:40.520 us in one way or another, or because the ups 0:17:40.560 --> 0:17:43.800 and downs in the value of real estate has historically 0:17:43.840 --> 0:17:46.919 played such a role in amplifying the booms and busts 0:17:47.440 --> 0:17:50.920 in the broader economy, but also it occurred to me 0:17:51.000 --> 0:17:53.480 in a slightly more philosophical way that it seemed to 0:17:53.880 --> 0:17:58.440 embody the tensions the contradictions we're seeing playing out in 0:17:58.680 --> 0:18:02.240 this chapter of global capitalism. When you look at any 0:18:02.280 --> 0:18:06.359 given country where governments and those who have prospered in 0:18:06.440 --> 0:18:08.959 these years of rising asset prices they're all doing all 0:18:09.040 --> 0:18:12.680 they can to prop up property markets, But then you 0:18:12.760 --> 0:18:15.399 have a big chunk of the population, including lower income 0:18:15.480 --> 0:18:17.720 households and young people. We heard some of them at 0:18:17.760 --> 0:18:20.520 the beginning of the show who'd like nothing better than 0:18:20.600 --> 0:18:23.040 to see house prices fall and for housing finally to 0:18:23.080 --> 0:18:25.920 become more affordable. So, before we get into some of 0:18:26.000 --> 0:18:28.440 the sort of market dynamics, where you stand on this 0:18:28.560 --> 0:18:32.280 particular issue very much depends on where you live or 0:18:32.359 --> 0:18:37.719 don't live, doesn't it. Well, certainly where I live in Manhattan, 0:18:38.600 --> 0:18:42.000 the issue of affordability is about as acute as it's 0:18:42.040 --> 0:18:45.800 possible to imagine. One of the critical problems you always 0:18:45.880 --> 0:18:49.920 faced with their property is that even though people treated 0:18:49.960 --> 0:18:54.600 as an investment, it's something you truly need. Shelter is 0:18:54.600 --> 0:18:59.320 a very basic human need. You could argue it's almost 0:18:59.320 --> 0:19:04.560 an urged it's it's um goes back to John Locke 0:19:05.440 --> 0:19:08.439 and the whole idea of property rights, that you cannot 0:19:08.600 --> 0:19:13.359 really be a full fledged citizen or a full fledged 0:19:13.480 --> 0:19:18.560 participants in the economy without some property. So yes, it's 0:19:18.840 --> 0:19:24.080 this is always more difficult for governments and more dangerous 0:19:24.240 --> 0:19:28.920 for the economy than stocks. You could, let you know, 0:19:29.119 --> 0:19:33.280 in two thousands, um the dot com boom blew up, 0:19:33.440 --> 0:19:36.720 and there was a mild procession thereafter. In two thousand 0:19:36.760 --> 0:19:40.160 and seven, the housing bubble blew up and all hell 0:19:40.240 --> 0:19:41.960 broke loose, And there's a there's a reason for that. 0:19:42.080 --> 0:19:45.840 You people can bear the notion of losing money on 0:19:46.000 --> 0:19:53.119 other assets. Losing money on property is a fundamentally different proposition. 0:19:53.359 --> 0:19:57.320 And that's why I would say you should always in 0:19:57.480 --> 0:20:01.840 any kind of financial you know, tour of the horizon, 0:20:02.000 --> 0:20:04.920 you should always be on the lookout for whether real 0:20:05.080 --> 0:20:09.120 estate is in danger. That's what can tip a financial 0:20:09.160 --> 0:20:13.520 event into something more serious. There's a lot of economic 0:20:13.560 --> 0:20:17.000 evidence now that when you look back and you say, well, 0:20:17.040 --> 0:20:19.480 why wasn't you know, for example, the you know, the 0:20:20.960 --> 0:20:26.320 market crash of barely remembered now, and indeed the stock 0:20:26.359 --> 0:20:28.520 market was more or less back where it was by 0:20:28.560 --> 0:20:30.960 the end of that year. They didn't have that knock 0:20:31.040 --> 0:20:33.520 on effect for the broader economy that you did see 0:20:33.720 --> 0:20:36.399 for example before the global financial crisis when the U s. 0:20:36.560 --> 0:20:38.760 US housing obviously triggered all these things. So it definitely 0:20:38.800 --> 0:20:40.399 does seem to make the difference between the sort of 0:20:40.480 --> 0:20:44.280 minor market correction and a broader economic recession. So I 0:20:44.359 --> 0:20:46.639 guess that the big question we have to ask is 0:20:46.720 --> 0:20:49.800 do you see that transition happening today? Do you see 0:20:49.920 --> 0:20:52.120 enough problems in the housing market that what we've seen 0:20:52.200 --> 0:20:54.600 in the financial markets in the last few months possibly 0:20:54.640 --> 0:20:58.960 a bear market now that's going to turn into something 0:20:59.080 --> 0:21:03.760 much worse. I do see the real possibility of that. 0:21:04.280 --> 0:21:06.800 I don't. I wouldn't say it was yet an inevitability. 0:21:07.720 --> 0:21:10.920 If you start with the States, then yes, house prices 0:21:11.119 --> 0:21:13.480 are now even in real terms, higher than they were 0:21:13.520 --> 0:21:16.960 at the top in two thousand and six. Uh. And 0:21:17.640 --> 0:21:21.760 demand has been very aggressive and there is now clear 0:21:21.960 --> 0:21:26.719 sign of a turn. You've seen new house sales falling 0:21:26.840 --> 0:21:29.399 from a high level each month for several months now. 0:21:30.640 --> 0:21:35.280 Measures of housing sentiments have got very much weaker. Uh. 0:21:35.680 --> 0:21:40.840 And that's also you've got to throw in the very 0:21:40.920 --> 0:21:45.320 serious displacements caused by the pandemic. Lots of areas are 0:21:45.400 --> 0:21:48.280 much more appealing than they were three years ago, very suddenly, 0:21:48.880 --> 0:21:52.520 and others are much less appealing. It's those sudden breaks 0:21:52.720 --> 0:21:58.560 that markets can have a difficulty dealing with across the world. Um, 0:22:00.400 --> 0:22:03.400 the UK has long had I don't need to tell 0:22:03.440 --> 0:22:08.600 you that's a bad habit of when in doubt inflates 0:22:08.720 --> 0:22:13.520 the stock market, and that leads to always the risk 0:22:13.640 --> 0:22:19.680 of in Britain, of that a housing market can bring 0:22:19.880 --> 0:22:21.920 the rest of the economy down. It's a it's a 0:22:22.040 --> 0:22:30.159 very housing sensitive economy. Um. The great imponderable UH is China. 0:22:31.440 --> 0:22:35.720 We know for years now that the Chinese authorities are 0:22:36.080 --> 0:22:39.560 scared of a Minsky moment or a Lehman moment. You 0:22:39.640 --> 0:22:44.200 know Minsky for those uninitiated, is the idea is that 0:22:44.320 --> 0:22:46.960 the economist who came up with the idea that at 0:22:46.960 --> 0:22:50.960 a certain point confidence in debt can be lost, and 0:22:51.119 --> 0:22:54.280 that's when you have a crisis. For scale of what's 0:22:54.280 --> 0:22:57.920 happened after Lehman Brothers in twoth has and eight um, 0:22:58.800 --> 0:23:02.040 there is an an imaginably large amount of money that 0:23:02.160 --> 0:23:06.199 has been borrowed for the state in China. There are 0:23:06.600 --> 0:23:13.320 many property developers in very serious trouble UM and the 0:23:13.400 --> 0:23:17.639 investment is falling there even as fixed assets in other 0:23:17.720 --> 0:23:21.840 fictity investment is improving. It's plainly very much of an 0:23:21.880 --> 0:23:26.639 Achilles heel for the Chinese property sector. For sorry, for 0:23:26.680 --> 0:23:30.879 the Chinese economy. My best guess is that China is 0:23:30.920 --> 0:23:34.120 still in enough control that it can manage a very 0:23:34.320 --> 0:23:40.280 slow period of growth, possibly even a recession without a 0:23:40.359 --> 0:23:44.080 blow up, without a major crisis for the rest of 0:23:44.119 --> 0:23:47.960 the world having become as dependent as we have on 0:23:48.119 --> 0:23:52.080 Chinese growth, that's still quite an alarming prospect. I mean, 0:23:52.119 --> 0:23:53.720 there's probably a few things so that we should pick 0:23:53.800 --> 0:23:55.720 up on. But just going back to going back to 0:23:55.760 --> 0:23:57.960 the US, I mean, and it came up earlier in 0:23:58.000 --> 0:23:59.760 the program as well, that you know, we had the 0:24:00.000 --> 0:24:03.680 economy go south during COVID in a kind of dramatic way, 0:24:03.720 --> 0:24:06.679 and then we've had the sort of interesting mixed up 0:24:06.720 --> 0:24:08.960 pattern of the recovery, a different kind of recovery than 0:24:09.000 --> 0:24:11.480 we've had before UM and that has caused its own 0:24:11.480 --> 0:24:13.680 problems with supply chains and everything else that we've talked 0:24:13.720 --> 0:24:17.200 a lot about in stephonomics. But actually house prices had 0:24:17.280 --> 0:24:20.960