Why are people so keen to see house prices rise, when housing is one of their biggest expenditure items? Homeowners are happy to see the value of their asset go up but for the economy overall, house prices can only go on rising if every generation is willing and able to pay more than the last. Politicians are anxious to prevent house prices falling but they are in danger of confusing a symptom with a cause – a stronger economy generates higher house prices but higher house prices do not generate a stronger economy.
About the authors
Economist Insights is written by Joshua McCallum and Gianluca Moretti. Joshua has been working at Global Asset Management with the title of Senior Fixed Income Economist since 2005. Prior to this, he worked at the UK Treasury as a macroeconomist. Gianluca joined Global Asset Management in 2010. Prior to this he worked at the Italian central bank.
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