The holding costs [government taxes, interest rates, opportunity cost, etc] of real estate all around the globe are rising and this will push housing prices down.
Over the next two years those who own, rent, or are buying real estate will consider the holding costs of their property as a key factor determining the prices of this asset class. With the cost of energy rising and rising the actual location of real estate asset becomes more important in terms of transport to and from it, the local rates on it, etc than proximity to the beach [see photo].
Real estate has been a great store of value for the past twenty years but that trend has peaked and is about to turnaround. Homes for families have a non-monetary value that includes access to good schools, colleges, health care facilities, and aged care provisions. These amenities have been provided by the public sector over the past three decades but more and more often in the future it will be a private sector service. This will happen because the public sector will be swamped with debt and it huge interest bills that take more and more of its total revenue. Public sector ability to provide services will become more and more limited. In an attempt to get out from under the weight of public debt governments at all levels will raise taxes and fees. A direct consequence will be less public sector provision of amenities that support suburban living. Suburban real estate prices will gradually fall.
There is not likely to be a sharp fall in global real estate prices but they will begin to fall over the next year or so.
Richard.
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