House prices boom despite the pandemic
WHEN THE pandemic shut down the world’s economies last year, you may have supposed that housing markets would be clobbered. Not a bit of it. In 25 economies tracked by The Economist, house prices rose by 5%, on average, in the latest 12 months for which figures are available. In America they climbed by 11% in the year to January. In Britain they are up by 8%. In almost covid-free New Zealand, they have soared by 22%. Like other asset prices, house values have been buoyed by ultra-low interest rates and fiscal stimulus. Furlough schemes have limited distress sales. And the expectation (or hope) that people will keep working at home more and in offices less has fuelled demand for space away from the centres of big cities (a trend already long under way in the American West). Some central bankers worry about the pace of price rises.
But there is no sign of slackening lending standards, as in past booms. Policymakers should tackle the market’s long-term problems: that means getting rid of tax breaks for homeowners and regulations that shackle supply.