Why is housing on the rise in the midst of a recession?
Turkey, the Philippines, Germany, Slovakia, Romania, New Zealand, Portugal, Russia, the Netherlands... wherever we look, housing is becoming more and more expensive. In 38 of the 49 countries reporting statistics the housing price rose. In the United States it was a whopping 5%. Even in Spain, with the GDP in the worst fall since the end of the war, housing became 2.1% more expensive than the previous year, despite the lockdown. Only where capital is running away, like Argentina or Egypt, housing is down... and even then, less than any other asset. Why?
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Where does the speculation come from?
Why is speculative capital dedicated to housing?
In recent years, capital funds have been dedicated to rehabilitating and leasing out abandoned half-built homes during the first years of the crisis that erupted in 2008.
The easy kind of speculation is upward speculation: you buy what is expected to be revaluated without the need for very precise terms. You buy shares in companies because you think they will give more profits in the future or because a buyer will raise the price with an offer; you buy rights to purchase raw materials waiting for industrial demand to rise; basic foodstuffs -such as wheat- waiting for increases in consumption or falls in production to make them more valuable... etc. etc.
In that logic, housing is a logical destination for speculation. In principle, demand should grow with population. In countries such as Spain, since 1900 the total population did not decrease a single year until 2013. And it grew again relatively soon, in 2016. Supply is also regulated by the municipalities, which decide the land that can be devoted to building homes and their conditions. But, as in virtually everywhere else in the world, municipalities are chronically indebted and financially under-resourced, so they depend on the revaluation of land to earn income with which to invest and build themselves, so municipalities are the first to ensure that prices do not fall. That's why, for decades, investing in housing was a 'safe business' and accessible to relatively small capital, so it attracted a multitude of small speculators as well as large funds.
Why did housing fall during the 2008 crisis?
rising capitalism|youth phase of capitalism
How did the speculative housing market regenerate itself?
The outbreak of the crisis meant not only a devaluation of housing but also a direct attack on wages and a general drop in prices. Tourism was more competitive than ever, the ratio of tourists per inhabitant multiplied until it saturated entire neighborhoods in Lisbon, Oporto or, to a lesser extent, Barcelona. The emergence of a new business model, with Airbnb at the helm, made it easier for capitals to land en masse again in real estate. Tourist apartments were just the start, but they set new trends. The speculative market was gaining ground again, but now under a new model. Funds were investing in housing packages for renting to a mass of workers who, increasingly precarious, could no longer trust themselves to take out a mortgage and regularly pay a mortgage for thirty years. The rental market rose dramatically, giving returns of 6% to the funds and making rents grow faster than home purchase prices for the first time. Housing was again used to place local and foreign capital. It was a part of the new Spanish miracle of the Rajoy years: GDP was growing and everyone was pleased with the country's attractiveness for investment... but workers' income and their purchasing power was decreasing.
Why does housing keep on rising in the middle of a new crisis?
From the point of view of capital, any recession means the disappearance of profitable destinations. Companies accumulate debts and losses, a good part of the speculative markets are in a downward spiral, beginning with oil. New businesses appear -the production of masks, for example-, others increase their profits -delivery, reagents, etc.- but not even by far do their needs for capital leave room for all the mass of capital accumulated before the crisis. If we add to that zero or negative interest rates, we understand why capital has a real urgency to place itself in something like housing, where demand is relatively stable and which today continues to offer very positive expectations for speculators. Among other things, because the risk of defaulting on rent is always much lower than on a mortgage. But above all because during the last five years rental prices rose by 50% in Spain. The result is that more houses are bought to rent and logically, prices rise.
The Bank of Spain itself, seeing that housing can be a lifeline for the large masses of capital with no destination, has had no better idea than to pressure the government to improve the profitability of socimis, listed companies dedicated specifically to buying and operating real estate. In other words, everything points to the housing market becoming even more concentrated and prices rising.
What does this mean for workers?
Demonstration against the rise of housing in Berlin.
We have to get used to seeing the economy from the point of view of class relations, which is what capital does when it designs policies in the face of the crisis. Policies that in the end are nothing but forms of organizing massive transfers of labor to capital. Housing is no exception.
The increase in rent is a drop in wages by other means and with a focus on the younger sectors and therefore with more difficulty in organizing the class. Because let's not forget: capital flows and does not care too much about its own placements considered one by one. What is at stake is the distribution of the result of exploitation between capital and workers as a whole, so it is the struggle of one class against another, not of the workers of a company against their owners or the prices of a commodity against another. Housing, renting, is one more point where capital can make its economic levy, put the responsibility on the market - which is the mere translator of its interests - and make use of the state to ensure the conditions of extended exploitation. A new recession is coming. Now more than ever the contradiction between human needs, general needs, our needs and the needs of capital - to exploit more and to obtain more profit - are starkly shown.
"Why did rents go up and buying go down? (in Spanish)", 8/2019