> I've never understood how real returns on house prices could be believed to be sustainable. If the value of a house appreciates in terms of purchasing power for some other good at a constant rate, at some point in the far future just a single house would become valuable enough to purchase the entire global supply of the other good.
This is likely on me for misunderstanding your comments, but if housing costs increase in line with inflation then everything else will get expensive too. The relative cost of other goods will be constant, and we would never reach a place where a single house could be so relatively valuable.
Unfortunately, house prices have been outpacing inflation. This can't continue forever. It's being propped up by laws and policies and special tax exemptions, but eventually the majority of voters will live in rental accommodation, and they'll vote for policies to bring house prices back in line with inflation.
GP is talking about housing appreciation in excess of inflation — the terms they used “real return” and “purchasing power” are specific economic terms that mean inflation-adjusted rate of return or price levels respectively.
>but eventually the majority of voters will live in rental accommodation, and they'll vote for policies to bring house prices back in line with inflation.
For most developed countries with declining birth rates, the opposite will happen, older generations will be more than ever represented politically and they will vote to favour home ownership bcs they inherited valuable assets from previous generations and/or had the possibility after decades of renting to get on the property ladder.
This is likely on me for misunderstanding your comments, but if housing costs increase in line with inflation then everything else will get expensive too. The relative cost of other goods will be constant, and we would never reach a place where a single house could be so relatively valuable.
Unfortunately, house prices have been outpacing inflation. This can't continue forever. It's being propped up by laws and policies and special tax exemptions, but eventually the majority of voters will live in rental accommodation, and they'll vote for policies to bring house prices back in line with inflation.