Popping Real Estate Bubbles Will Prove Painful
How long before politicians are tempted to soften the blow of rising interest rates on the property market?Gift this article
House prices are starting to fall around the world.
Photographer: Chris Ratcliffe/Bloomberg
By Lionel Laurent
July 20, 2023 at 12:00 AM EDT
Faith that interest rates would stay low forever fostered a “fool’s paradise,” according to former Bank of England boss Mervyn King. Nowhere is this more obvious than in the unraveling of the global real estate boom, which is now turning into bust as prices start to fall around the world. Fair enough: After so much speculation and overvaluation amid an undersupply of new homes, a healthy correction is exactly what a lot of societies need.
But the return to normality looks hellishly unequal amid a broader cost-of-living crisis, high inflation and a persistent lack of housing supply — and brings the risk of more social anger, as interest rates prove to be an even blunter tool on the way up than on the way down. The temptation to soften the blow will be
