What I learnt from China about Housing
Why treating housing like a stock market is making us all worse off
The old and new in China - central Beijing.
The biggest lesson I have learnt from living in China is the effect of housing on an economy.
China went through an enormous construction boom, between 2000-2020, then reversed course starting in 2020-2021.
House prices boomed relative to incomes as people had access to finance for the first time, sold that house, then bought another with more debt.
Until the building stopped.
And it affects everything.
Now 15,000 kindergartens are closing a year and they're being replaced by care homes, beauty salons and pet shops.
The same happened in Korea, Japan, to a lesser extent in UK, and can be seen all over the world.
We need to learn the lessons from Asia before it's too late.
I think we've got housing fundamentally wrong.
Young students and graduates are now paying the price. But it affects all of us.
Cities run out of space, populations age, and we try to cap or reduce city sizes, or limit building.
As GDP is the master incentive of an economy, we artificially limit the supply of housing to increase prices and "grow" the economy and housing becomes extractive.
"When a measure becomes a target, it ceases to be a good measure." Goodhart's law.
Birth rates plummet, because people are rational.
And the effects of this are largely irreversible.
So the solution to the coming labour shortage is immigration or to build robots? Then we don't need to build more houses, and can continue the illusion of economic growth.
At the cost of a society that's actually flourishing.
Housing can't be both a good investment for pensions, rising faster than incomes, and affordable for young people at the same time.
So we get short term economic growth at the expense of future economic capacity.
It's a deep economic contradiction that shows up everywhere - from affordability of university, careers, living expenses, and inflation.
An economy can't continually grow while constraining housing.
Housing should be seen as infrastructure.
Because, like roads and energy, housing is a fundamental thing we need to function in a society, that enables mobility, real growth, family formation and the entire market to flourish.
Rather than an investment that is artificially limited that looks like growth on paper.
Otherwise it just becomes a black hole sucking value out of the real economy.
It's for the same reasons we don't seek to grow the economy by increasing tolls on roads.
If we choose to build abundant housing, it would bring a real long term boom.
But that window is closing.
Thoughts?