What I learnt from China about Housing
Why treating housing like a stock market has made us all poorer
This is in central Beijing - it shows the huge difference between old and new.
The biggest lesson I have learnt from living in China is the importance of housing to 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 it stopped.
And it affects everything.
I see the same in Korea, Japan, to a lesser extent in UK, and all over the world.
I think we’ve got housing fundamentally wrong.
Young students and graduates are now paying the price. But it ultimately affects all of us.
When cities run out of space and we try to cap or reduce population sizes, or limit building, and as GDP is the master incentive of an economy, housing becomes extractive.
We artificially limit the supply of housing to increase prices and grow the economy.
“When a measure becomes a target, it ceases to be a good measure.” Goodhart’s law.
Birth rates are plummeting, because people are rational.
And the effects of this are largely irreversible.
The solution to the labour shortage is to build robots.
Housing can’t be both a good investment for pensions, rising faster than incomes and affordable for young people at the same time.
It’s a deep economic contradiction that shows up everywhere - from affordability of university, careers, living expenses, and inflation.
Housing should be seen as more like infrastructure.
Because it’s a fundamental thing we need to function in a society, that enables social mobility and the entire market to function.
Rather than an investment that is artificially limited.
Otherwise it becomes a black hole sucking value out of the entire economy.
For the same reasons we don’t put tolls on roads to increase economic growth.
If we made the decision to continue allowing the building of abundant housing we would see an enormous economic boom.
Thoughts?