> 1. When you say "unsafe" what do you mean? Over the long term (centuries) house prices remain stable (at around 3x annual household income iirc - I might be

> 1. When you say "unsafe" what do you mean? Over the long term (centuries) house prices remain stable (at around 3x annual household income iirc - I might be off by a bit but not an order of magnitude). This hasn't happned over the last 50 years; house prices have steadily risen over this period. Investors are now used to a housing market where house prices rise in real terms, and have the belief that this is always going to happen. This is not always going to happen. A. because it can't. B. because the underlying economic driver for house price increases will stop (I believe we're around this point now: almost all houselholds are dual revenue now). Your graph is an illustration of this. People are buying less houses now. What happens to this market over the next 20 years when the boomers' vast real estate holdings get added to this market? > 2. What do you envisage happening that causes a fall? I believe house prices are only marginally driven by supply of housing, and much more driven by supply of money. The crash of 2008 wasn't driven by housing shortages, but by money shortages. The financial engineering of the 80's led to financialy institutions being able to lend more to more people, so house prices went up. Housing stocks also increased, which should have driven house prices down, but didn't. This was also helped by households moving from single income to dual income as women entered the workforce. The "steady" underlying price of housing at 3x household revenue almost doubled over this period as households gained twice the revenue. So, the crash will be caused by two things: A. Another problem in the supply of easy mortgages. B. A reduction in the average household income Something like COVID ticks all these boxes. > 3. Do you believe it's likely that there would be a slowing of growth, followed by a period of stagnation, before a gentle decline? In some cases, yes. Perth, in Australia, has been experiencing this. House prices there have been going down by ~2% a year for the last 5-8 years after a 20-year boom. It's causing some pain, but not a crash. People still believe that houses are a good investment, and that it'll turn around again. Most believe that there'll be another boom and they'll see their house double in value again. Property HODLers ;) But in others, when it goes it'll go fast. Especially with the kind of trigger that COVID is/will be. > 4. If yes to 3, why do you believe that this is an unsafe market for the long term investor? Because of the mixed emotional baggage around it, and the automatic leverage involved. Any investment market can crash. But if you invest your savings into Bitcoin and it goes south, then you lose some money. Disappointing but no big deal. You had the money to lose, and it's not your home. If you borrowed every cent you had to invest in Bitcoin, and it crashed, then you're bankrupt. But everyone would tell you that this is a stupid move and you are an idiot for leveraging that much. However, if the investment is housing rather than Bitcoin, then the common advice is to borrow as large a mortgage as the bank will give you, and buy the most expensive house you can. No-one gets warned that a twitch in the market or a sudden job loss can make you bankrupt and homeless. Renting a property to live in, and then buying a house for cash with savings (and renting that out) could be a smart way of investing in property. If it goes wrong, you're not homeless and you had the money to lose. Investing everything they possibly can into a housing market that is declining by ~2% a year sees people trapped in underwater mortgages that they can't get out of. This prevents them from moving to get better work, or making any changes to their lifestyle that might reduce their ability to service that mortgage. If this wasn't a voluntary arrangement we'd call it slavery. It's a horrible situation to be in, and it destroys lives. That's why I think the way that the anglo world invests in property is stupid and unsafe. Because if this was any other investment market, it would be considered stupid and unsafe. And contrary to belief, there's nothing special about housing that makes it a "safe" market to invest in. The value of your investment can go down as well as up. > I believe that fiscal illiteracy is what is really doing harm to our society. Apologies, I thought you meant that my fiscal illiteracy was causing me to believe this. I think you're right that fiscal illiteracy is to blame here, at least in part. If people were taught not to invest money they couldn't lose, then the property market couldn't function. Having seen how it operates here in Berlin, this would be a good thing. No more amateur landlords! :)