Chapter 1: Since the 1950s, real estate has outperformed any other investment.

Promises that are no longer valid
A world where wealth accumulation is fueled by "real estate transfer income."
The housing crisis is the epicenter of modern capitalist crisis.

Chapter 2: How Our Homes Transformed into Financial Assets

81 percent of the increase in house prices is due to land prices.
Land where supply is limited and demand continues to grow
Competition for location, and our home in the middle of it all
Homeownership rates in the 21st century are lower than in the 1970s.
After World War II, the government protected the housing market.
The neoliberal era has made housing an attractive financial asset.
The United States has low property taxes and reduced capital gains taxes.
Making homes an investment with tax benefits
A government that supports the 'commodification of housing'

Chapter 3: How Mortgage Lending Became a Global Explosion

Can increased lending alone drive up house prices?
The global increase in home mortgage lending that began in the 1990s
In the US, banks are starting to exert their influence.
UK government-led deregulation
How the Housing Finance Market Captivated Global Investors
Political reasons why the government encourages home purchases
The collapse of the housing bubble had the most serious and longest-lasting impact on the economy.
The vicious cycle of housing prices and loans spreading around the world
Why house prices continue to rise in Spain and Ireland despite increased housing supply

Chapter 4: Are Governments and Central Banks Irresponsible?

Stability breeds instability.
Have rising housing prices effectively boosted the economy?
Has the central bank been doing its job properly?
Mortgage Loans and the Life Cycle Hypothesis
Banks' preference for real estate collateral
Governments and central banks are responsible for the soaring housing prices of the 21st century.
Global capital raids local real estate markets
Reintroduction of securitization in advanced countries
Could Europe's certification system support banks addicted to real estate?

Chapter 5: How Can We Break the Vicious Cycle in the Housing Market and Finance?

Real estate has been the best investment for the past 130 years.
Control over credit rather than interest rates
Large private banks prioritizing shareholder interests are a contributing factor to the global financial crisis.
Why Germany's mortgage debt only accounts for 30 percent of GDP
State-owned banks replacing private banks
Real estate as collateral and alternatives to mitigate its risks
Tax reform: taxing appreciation in value
The OECD and IMF also call for an increase in real estate taxes.
How to exclude land from speculation
The Singapore government offers housing rentals to 83 percent of its citizens.
Countries with lower home ownership rates are more stable in economic and financial fluctuations.

Chapter 6: For Our Homes to Become a Right, Not a Commodity

Can we just leave it to the market?
The Evolution of Mortgage Loans in the 20th Century
To become a space for living, not a commodity

Acknowledgements
Source

The housing crisis is at the epicenter of modern capitalist crisis.

Recently, U.S. Treasury Secretary Scott Bessent said in an interview that the Donald Trump administration is considering a drastic measure called a “National Housing Emergency” to address the skyrocketing housing prices in the U.S.
As such, the housing issue is a global concern.
Recently, rising housing prices have emerged as a major economic and social problem in Korea.
The author, a British housing market expert economist and professor at University College London, examines the housing price fluctuations in major developed countries such as the United States, Canada, Australia, the United Kingdom, Germany, Switzerland, Spain, Ireland, and Denmark from after World War II to the present day. This book explains how our homes have become “financial assets” and “investment products” that attract investors around the world, rather than just living spaces, and addresses the global housing price surge and housing instability issues we are currently experiencing as a result.
In particular, it traces the roles played by governments, central banks, and finance companies in each country in this process, pointing out that they bear “significant responsibility” for the rise in housing prices.
The author also refutes the argument that increasing the “housing supply” can solve the housing price problem, citing the examples of Spain and Ireland.
Ultimately, it is argued that we must move beyond the perspective of housing as a means of increasing wealth and establish a new discourse that considers it a “right” for everyone to enjoy safe and affordable housing.

The promise that “if we work hard, we can own our own home” is no longer valid.
So why did this happen? In this book, the author traces the cause.


Housing markets in the United States, the United Kingdom, Canada, Singapore, Germany, Switzerland, Australia, and New Zealand

In particular, the author examines trends in global housing price fluctuations in the late 20th and 21st centuries, examining the phenomena that occurred in each country's housing market due to global investors' raids on local real estate markets, governments' encouragement of home purchases, central banks' quantitative easing, financial deregulation, and the internationalization of capital.
That is, we examine the current situation through various data such as London, where house prices rose 2.1 percent when the proportion of housing transactions by foreign investors increased by 1 percentage point; Australia and New Zealand, where real estate values ​​tripled to quadruple their GDP in four years; Germany, Austria, and Switzerland, which did not experience the rapid rise in house prices that occurred in most Western countries and have a homeownership rate of less than 50 percent; the Netherlands, which encouraged home purchases by deducting mortgage interest from income and thus benefiting from tax breaks, which resulted in a decrease in tax revenue of approximately 2.14 percent of GDP in 2015; Singapore, where 83 percent of the population rents their homes; Spain and Ireland, where relatively weak development and building regulations led to a rapid increase in mortgage loans that led to a construction boom with disastrous consequences for the real economy; and the United States, which allowed low-income earners to borrow up to 95 percent of the house price, and is poised to trigger the worst financial crisis since the Great Depression worldwide.

How did our homes, a typical "real asset," end up transforming into "financial assets"?

Our homes currently perform “two economic functions.”
One is its role as a “consumer good” that provides a warm nest and a safe living space for families, and the other is its role as a “financial asset.”
Homes have now become an attractive financial asset that can provide much greater wealth growth than other forms of assets such as savings, stocks, and government bonds.
This phenomenon has become particularly pronounced globally over the past 20-30 years, with real estate in fact being the best investment in developed countries for the past 130 years.
This is because it has the same average annual return as stocks, 7 percent, but with much less volatility.


Now our homes have become a store of value, like gold.

Real estate in major global cities such as Paris, New York, London, Hong Kong, and Toronto has become virtually equivalent to gold.
In other words, it has become the “most preferred means of collateralization” for people.
This means that real estate, although inherently speculative, has still become a “safe store of value.”
The two functions of a consumer good and a financial asset can be complementary in certain circumstances.
However, when housing prices rise beyond our income level, the demand for housing as a financial asset explodes, ultimately taking on a “speculative character.”
As a result, it becomes much more difficult for most people to use “housing as a consumer good.”


The phenomenon of skyrocketing housing prices in major advanced countries in the 21st century

It was only after World War II that most citizens in English-speaking free-market economies began to own their own homes.
Until 1960, despite population and income growth, housing prices remained virtually unchanged.
However, with the advent of the neoliberal government, house prices rose by about 65 percent by the 1990s due to cuts in real estate taxes, a reduction in the state-led supply of affordable housing, and a gradual expansion of mortgage lending.
Even more notable changes have occurred over the past two decades.
Real home prices have risen by another 50 percent.
In particular, house prices in Toronto have doubled in five years, while in the two major cities of Sydney and Melbourne, house prices rose by an average of 14 percent and 10 percent per year respectively between 2013 and 2017, and property prices in London also increased by 54 percent in four years.
However, during this period, real average incomes were virtually stagnant and did not increase, yet home mortgage loans increased exponentially.


So why did housing prices skyrocket in the 21st century?

Until the 1970s, housing prices did not rise this steeply.
However, starting in the late 1970s, with the full-scale introduction of neoliberal policies into Western societies, financial regulations were relaxed.
This allowed for free movement of capital between countries, making it easier to secure funds, and in the 1980s, mortgage lending, which had been largely limited to standalone mortgage lending specialized financial institutions (savings and loan associations in the US and building savings associations in the UK), was opened to general commercial banks on a large scale, expanding the mortgage loan market.
With the government encouraging home purchases, the central bank's quantitative easing policy, and competition among banks, it became easier to obtain loans at low interest rates, leading to an explosive increase in demand for housing as a financial asset.
This ultimately led to the housing bubble and the 2007 global financial crisis.

Banks "addicted" to real estate collateral, driven by the global explosion of mortgage lending since the 1990s.

Today, banks in developed countries lend far more to households buying existing homes or real estate than to businesses investing or consumer purchasing.
As a result, while mortgage loans in advanced countries have surged from about 40 percent to 70 percent of GDP over a 20-year period since the early 1990s, corporate loans have stagnated, increasing by only about 5 percent.
During the same period, average real home prices also rose by about 50 percent, following a similar trend to mortgage lending.
The root cause of the 2007-2008 global financial crisis was also excessive credit supply (overlending) in the housing market.


Can increased lending alone drive up house prices?

As home prices rise faster than incomes, owning a home becomes increasingly difficult.
Home equity loans bridge this gap, allowing households to purchase a home without having to spend years saving for it.
But this also comes with side effects.
If the money borrowed against a home is used to build new homes, the newly created money can contribute to economic activity.
However, in most cases, home equity loans are used to purchase existing real estate on existing land.
As households supported by banks compete with each other to buy existing properties, housing prices ultimately rise.
Loans to purchase existing real estate and land only lead to higher housing prices and increased household debt, without stimulating the overall economy.
Ultimately, as housing prices rise, demand for mortgage loans increases again, which in turn drives up housing prices even further, perpetuating the “mutually amplifying cycle between housing and finance.”

A 10 percent increase in household debt would lead to a 6 percent increase in nominal average house prices.

Over the past 30 years, it has been proven that there is a clear correlation between the two variables: mortgage lending and house prices.
In a study of 19 countries from 1980 to 2005, the OECD estimated that real house prices rose by 30 percent as a result of increased mortgage lending due to deregulation.
This is a very high figure compared to other variables. A similar study conducted by the IMF, extending the period to 2010, found that a 10 percent increase in household debt led to a 6 percent increase in nominal average house prices.
Countries that deregulated their mortgage markets in the 1980s experienced faster and more volatile housing price increases as lending increased than those that did not.
This can be seen as strong evidence that increased bank lending has driven up house prices regardless of housing demand or the overall economic situation.

Real estate price fluctuations have the greatest impact on the modern economy.

In most developed countries today, the shock of the “real estate bubble” has proven to be the most severe and long-lasting across the economy.
In many countries, sharp declines in real estate prices have led to corrections, with long-term damage across the economy.
There is growing evidence that modern economies are driven more by long-term credit and financial cycles (16- to 18-year cycles) driven primarily by changes in land and real estate values ​​than by the typical, short-term business cycles (typically 2-3 year cycles) that most economists have focused on.
In other words, the “long-term financial cycle driven by real estate prices” plays a more important role in the modern economy.

Why Governments in Major Developed Countries Encourage Home Buying

Neoliberal governments, concerned about growing public budget deficits, have found it politically expedient to encourage citizens to “accumulate assets” as a means of covering social welfare and retirement costs in an aging society.
In this process, a new policy direction called “asset-based welfare” emerged, which means that if each citizen owns assets, the government’s welfare cost burden will be reduced.
This means that if home ownership increases, people will be able to solve their welfare, retirement, and pension needs through increases in the value of their personal assets, such as rising housing prices, without having to rely on the government.


Did rising housing prices actually boost the economy?

Lower thresholds for home mortgage loans may have a short-term boost to consumption, but ultimately they exacerbate financial vulnerability and deepen wealth inequality.
Rising housing prices have actually led to a reduction in corporate lending, negatively impacting corporate investment in new technologies and new products, which has implications for the overall economy.
Furthermore, housing price fluctuations appear to have an unequal impact on the distribution of wealth rather than on the overall wealth and purchasing power of households.
A study analyzing 46 countries from 1990 to 2011 found that the larger the outstanding balance of loans on domestic real estate, the more negatively impacted economic growth.
The housing bubble and subsequent financial crisis triggered by bank lending have become more frequent in recent decades, deepening economic downturns.


Global investors raid local real estate markets worldwide (foreign investors buying homes)

With easy access to funds through low-interest loans, investors have been reaching out globally in search of high-yield, safe investments.
They freely crossed borders and entered the local real estate markets of each country, driving up housing prices there.
In the UK, a 1 percentage point increase in the share of foreign investors in registered housing transactions in London was found to increase house prices in London by approximately 2.1 percent.
In just four years, property prices in London have risen by 54 percent.


Additionally, the amount of money invested by overseas investors in the UK housing market increased from about 6 billion pounds (about 11 trillion won) annually in 1994 to about 32 billion pounds (about 60 trillion won) in 2014, accounting for 17 percent of total foreign direct investment in the UK.
This is a good example of how global capital influences local real estate markets.
In the United States, Chinese investors purchased 29,000 homes worth a total of $27 billion (approximately 38 trillion won) in 2016.
In Miami, massive apartment construction is underway with Venezuelan funding, and in Australia, Sydney and Melbourne are becoming major investment destinations for Asian investors.
Switzerland, on the other hand, restricts foreigners from purchasing real estate in the country.

Investors who view housing as a target for speculation generally target “top-tier” (very expensive) real estate, whether domestic or foreign, which naturally drives up the overall housing prices there.
As a result, owning a home is no longer affordable even for the middle class.

Can Increasing Housing Supply Really Solve the Housing Price Problem?

The author disagrees with the idea that increasing the housing supply will solve the housing price problem.
Progressives argue for building more housing, with little regard for the fact that the number of attractive locations people want (typically big cities) is inherently limited.
Liberals, on the other hand, argue that relaxing regulations related to urban development planning will solve all problems.
But they overlook the fact that the regulation itself stems from the scarcity of land and people's endless desire to live in a better place.
Focusing solely on the supply side of the equation for rising housing prices overlooks the unique and conflicting properties of land and credit.


Spain and Ireland: House prices rise despite increased housing supply.

Indeed, Spain and Ireland are prime examples of how simply building more houses cannot solve the problem of high housing prices.
House prices in Ireland doubled between 1997 and 2007, while in Spain they rose by 50 percent in just six years.
During this period, both countries experienced a tremendous housing boom.
House prices in both countries continued to rise until the financial crisis of 2007, when mortgage defaults surged and property values ​​plummeted.
Because no matter how fast you build houses, banks can create new loans even faster.
In other words, the two countries showed that no matter how many houses are built, house prices can continue to rise if loans are released more quickly.


Governments and central banks around the world are responsible for the soaring housing prices of the 21st century.

Central banks around the world must accept responsibility for failing to “foresee” the rapid growth of mortgage lending in the early 21st century and the resulting risks of rising house prices.
Since the early 1990s, monetary policies in each country have focused on the very narrow goal of “consumer price stability.”
As a result, the amount of credit and funds flowing into specific economic sectors and fluctuations in asset prices, including housing, were perceived as secondary issues.
Moreover, rising housing prices were recognized not only as a “healthy sign” of economic growth, but also as a factor that could support it.
The recession of the early 1990s and the dot-com bubble of the late 1990s led central banks around the world, including the U.S. Federal Reserve, to cut interest rates.
However, this coincided with a period in which housing prices began to rise sharply, which eventually led to a global financial crisis.

How can we alleviate this problem?

The general pattern of “increased mortgage lending and consequently higher house prices” is common in many developed countries.
To address this issue, the author argues for first financial reform, second tax reform, and finally changes in land use and ownership.


Currently, the entire financial system is structurally overly focused on real estate lending, and “policy intervention” is necessary to change the entire system.
Tax policies should also be designed to be neutral, not to favor homeowners or to favor specific housing types, whether owner-occupied or rented.
The government should also increase the supply of non-market housing, including public rental housing, community-led housing, and cooperative housing.
This should ensure a wider range of housing types and sizes, and make housing supply less dependent on the volatile private market.


Finally, the authors argue that providing suitable investment options and stable pensions is essential to discourage households from entering the housing market to save for retirement or cover living expenses in old age.