This is in fact quite an inaccurate analysis of the reason why house prices are so high.
In the 10 years up to the financial crisis, the amount of money created by banks to lend as mortgages quadrupled.
This is new money, released into the economy but restricted to only one product - housing.
As any junior economist will tell you, when there is too much money chasing too few goods, prices rise.
So the hyper-inflation we have seen in the housing market is due more to the ability of banks to create new money - and to decide where it is spent - than it is on shortage of supply.
Read this page and watch the video to understand this issue properly.
funny thing there're no shortage of washing machines, cars, ipads etc but homes are a different matter ....
ReplyDeleteThis is in fact quite an inaccurate analysis of the reason why house prices are so high.
ReplyDeleteIn the 10 years up to the financial crisis, the amount of money created by banks to lend as mortgages quadrupled.
This is new money, released into the economy but restricted to only one product - housing.
As any junior economist will tell you, when there is too much money chasing too few goods, prices rise.
So the hyper-inflation we have seen in the housing market is due more to the ability of banks to create new money - and to decide where it is spent - than it is on shortage of supply.
Read this page and watch the video to understand this issue properly.