Investment in residential real estate, along with property prices, typically rise and fall in correlation with economic growth and contraction, according to the economist Edward Leamer in his 2007 research paper, Housing is the Business Cycle.
While his study focused on the US economy, the findings were applicable to other countries – that is, until recently.
The COVID-19 global pandemic has upended the relationship between the property market and the economic cycle – with some geographies even seeing an acceleration in house price appreciation since the outbreak took hold globally in early 2020.
Near-zero interest rates, low inflation and other monetary and fiscal policies designed to support economic stability clearly play a role. So too, the increased value placed on housing when people are forced to stay home to stay safe.
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