A really interesting article in The Economist 5th March starts by saying "Property is widely seen as a safe asset. It is arguably the most dangerous of all."
The article, by Andrew Palmer, includes some interesting thoughts:
People buy property for various reasons, but dominant amongst those motives is financial gain. This mixture of motives can be toxic for financial stability. If housing were like any other consumer good, rising prices should dampen demand. But with property, higher prices are seen as a signal to buy. What happens if prices start to drop?
The value of any particular home is set by the latest local transactions. One absurd bid can push up prices for lots of people living nearby. But has it changed the intrinsic value of those properties?
An analysis shows that in America for the past 30 years renting was better financially than buying (but only if the renter meticulously saves the difference between the rent and what a mortgage would be costing).
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