> Deeply negative real rates and little indication that the ECB has the stomach for any substantive action.
You can't have positive real rates AND pump up the real estate bubble.
There are two parts to growth - population and actual growth.
The majority of "actual" GDP growth for the last 20 years in the West has been people paying more money (inflation adjusted) for the same land.
Why? Because you could! Interest only went lower.
Positive real yields mean people need to actually work instead of speculate on real estate. Most people would rather just speculate on real estate. It's so much easier.
Unfortunately, it's a zero sum game. The losers are renters.
I agree that the losers are renters, at least for now. Although it does speak volumes that at the current stage professional investors in Germany are expected to shift investments into bonds because the yield will likely be higher. It's still popular with small scale investors but I doubt that many people are really familiar with the possible risks.
That said I'm curious how things will develop. Now that U.K. expects up to 18% inflation I wonder if the price-salary-real estate spiral in the metropoles can keep up its momentum.
You seem to be implying or assuming that increased real estate prices lead to increased rent, but that's a non-sequitor; in fact, rents have become decoupled from real estate prices in many areas over the past 20 years.
I find this incredibly hard to believe, especially when it's not hard to find people that buy houses for the sole purpose of renting them out[0]. In order to ensure you at least break even in the short term, you'd need to charge a rent at least equal to the mortgage + property tax.
Negative cash-flow real estate (anywhere with absurd Price-to-Rent ratios) has DESTROYED the S&P 500 (on leverage) for the last 20 years because of abnormally high appreciation (leveraged) due to interest rates perpetually decreasing.
Most R/E is leveraged.
Historically, you did not need positive cash-flow in R/E to make a fortune, and a lot of the fortunes amassed came from negative cash-flow R/E that consistently become more and more negative cash-flowing...
It doesn't really make any sense unless you believe interest rates will perpetually get lower. Anyone who took that trade over the last 20 years did very well.
You can't have positive real rates AND pump up the real estate bubble.
There are two parts to growth - population and actual growth.
The majority of "actual" GDP growth for the last 20 years in the West has been people paying more money (inflation adjusted) for the same land.
Why? Because you could! Interest only went lower.
Positive real yields mean people need to actually work instead of speculate on real estate. Most people would rather just speculate on real estate. It's so much easier.
Unfortunately, it's a zero sum game. The losers are renters.