2008, which was considered to be the worst economic disaster since the Stock Market Crash of 1929. However, experts are of the view that the current state of affairs are different to that of the crisis more than a decade ago. Back in 2008, surging house prices was the key factor which triggered the economic disaster, as heavily indebted homeowners began to default their mortgage payment, which left lenders with a mountain of bad debt. This was mainly caused by insufficient regulations, easy credit and toxic subprime mortgages.
However, surging house prices amid the pandemic was mainly fuelled by increase in demand for bigger houses by owner-occupiers, who are white-collar workers that were fortunate enough to keep their jobs and work remotely from home. This also meant that rural properties became increasing popular with people not having to travel to work on a daily basis, and could move in to them in case of a lockdown. These factors, along with low interest rates, had the fundamentals of supply and demand lined up in a bullish way on the housing front.
Although this may suggest that this is not a repeat of the 2008 crisis, it does not mean it is without consequence. According to the IMF, surging house prices would mean certain segments of the population would be unable to access a healthy and affordable house, which would widen disparities of asset inequality. Moreover, house prices are known to be a driver of inflation and which has lately become a matter of global concern.
