There is no economic reason for rentals or house prices to fall as a result of so called inflation and relatively normal interest rates.
The news on so called high interest rates and inflation is a nudge program being hyped up to 'encourage' citizens to cool down during a natural cycle of high demand for real estate.
Governments keep delivering these programs, led by expert servants, despite it never having any lasting effects. Except to distort a natural market making it almost impossible to budget for your household or business in any rational way. Government does this genuinely in the hope of saving us guided by whatever ideology is leading their thought. I'm not anti government. I am just pointing at it repeating over history. In the UK for example, you can see the Monetary Policy Committee of the central bank are being instructed by authority and are only masquerading as experts on economic forces.
These imaginary high rates are affecting house prices, rentals and mortgages, only nominally in the psychological hive mind. In actuality the demand for higher house prices is still there retaining its overwhelming force on the real economy.
If you look carefully with an open mind, this is a government induced fear program. The intent is to 'encourage' the people to change behaviour. When under actual and natural conditions the people would not otherwise do so. Do you remember nostalgically the days when taxation was the instrument used to incentivise public behaviours?
The boom in house prices is following it's usual relentless and unstoppable march in the background, while government successfully scare the people into ... waiting. This background march is the intent of the people, eventually. One day when the fear program is seen for what it is and can no longer hold out, the people's intent will catapult like a giant spring pumping prices to where they would always have been. You cannot mess with nature.
Interest rates are not high, relatively. Look back to 2 years before the last great recession in 2007 for evidence when rates were just as high. While house prices yet again were booming well beyond the costs of living.
Nor is this inflation anyway. It's genuine price rises due to our involvement in the war meaning energy supply, a primary production factor affecting all others above it, is significantly reduced relative to demand. So prices are actually rising for real. It is not genuine inflation where more money is being pumped into the economy without the extra productivity to keep it all grounded. Though that has been happening too, mostly during the pandemic, and that has already ended up in house prices... all of it.
Real estate was and is now booming way past these extra costs in spite of them not being insignificant. Higher costs of living were then and are now easily being overwhelmed by the insatiable demand and mania for housing investments. Governments know this. And think they are being clever by hiding it behind a fear program. But these never ever work and distort things so badly that in the end it makes things much worse. True, fear is a very good way to buy your vote that is for sure.
Governments have become skilled and hyper confident from recent trials in using fear programs to 'incentivise' the people. In this latest exposition, we're being told to be scared about interest rates and inflation - costs of living. But it's a fake program in a vain attempt to cool house prices. A boom which in itself is the effect of government policy over the past 14 years since the last house price crash. Moving deck chairs on the Titanic.
Government are confident because it works. The people respond so well to a fear program. This is great for the party wherever it exists on the political spectrum. Leadership is not malign, they really believe they are doing it for the greater good. That is what happens when the hive mind is being led by ideology rather than reality. There is no conspiracy. Nor are government dumb. But it is acting out its real life in a dream state.
The net effect is simply that people are holding off from making real estate transactions. Transactions are piling up latently, while the fear program prevents supply from meeting demand. Yet again governments are distorting the market making it impossible for the individual to make a budget. We're holding out for when we're not so scared about the future. This time I estimate it will be about another quarter. Or when the west finally exits Ukraine as one more war is lost to attrition(price rises) with the peace also lost.
In the background, real estate is booming on an invisible ledger. And will continue to do so until the economy can no longer bear the price - which will be around 2026. It matters little how government interventions distort everything so recklessly while there is still a humungous glut of cash floating about. All the interventions will do is make the peak that much sharper and the crash that much more destructive and difficult to manage and recover.
If and when the people realise we've been 'nudged' in a systemic psychological campaign, or theres a global event triggering a wakening, watch out and prepare your household in every way you can.
All the pent up forces in people wanting to get into real estate will be unleashed in a price rise boom not even seen in 2005-7. I'm forecasting rises in selling price of 50% for the 12 months prior to the great recession, late 2026. And a 'correction' of a little less than the same amount, which will take several years to recover from.
Get your household ready for this:
- Change your attitude. To a difficult world. Stop caving in to fear programs. If you do, it was your choice to put your household in that much danger
- Save at least a years worth of payments in cash for all your debt, in case of unemployment and lost rental
- You cannot pass on increases of interest to tenants. They are already paying all they are willing, else you must have been leaving rent on the table already
- Stop reading the news or managing your budget through experts or from what you're told on social media.
Go Well.