With inflation soaring in many countries, looming bank rate increases are threatening to leave mortgage holders under water. Meanwhile, investors are gobbling up suitable properties to buy and then rent out (or hold vacant), forcing up rents for non-homeowners. How long before homeowners and renters alike are up to their lower lips in doo-doo, whispering ‘financialization’ in soft voices to avoid making waves.
Because financialization currently takes the blame for the speculative purchase and resale of housing for profit rather than using it for shelter. Okay, we have an idea of what is driving up housing prices. So what can we do about it?
In the West, relief from financialization seems to be beyond the capability of governments. Efforts are made, but on a puny scale1, having little overall impact. As the situation gets worse, are governments simply incompetent? Or are they somehow addicted to the loose change that falls from the fists of new housing billionaires?
Maybe we’re looking in all the wrong places. Why not try China?
China has gone bonkers for home ownership since the turn of the twenty-first century. Free market sale and purchase has been permitted. By 2018, one in five Chinese billionaires had made their fortune as real estate moguls, building, buying and selling housing.
Eight years ago, President Xi Jinping delivered a message that out-of-control financialization of housing in that country needed to come to an end. He announced that “homes are built to be inhabited, not for speculation.”
Today in China, everything has changed. Over the last year, housing prices have plummeted, with housing tycoons collectively losing 65 billion dollars. Not much of a year for tycoons, but a blessing for average Chinese.
President Xi has been hard at work implementing what the British have been recently calling ‘levelling up’ — a process to even out the national distribution of wealth. It’s something those in the West may talk about, but seem seldom able to do anything about.
President Li doesn’t seem to have that problem, however. For more on China’s war on financialization, read more at BNNBloomberg: Property Tycoons Lose $65 Billion After China Curbs Excesses
