Housing, debt and the economy: a tale of two countries
From 1996 to 2016, according to the OECD, the ratio of an index of German house prices to per capita household income has declined by 6%, while the UK’s has risen by 98%. This is the case despite the current boom in the German housing market, and the decline in Germany since 1970 is even more pronounced. The international picture since 1996 is quite diverse, ranging from zero in the US, to rises of 61 % in Germany’s neighbour France, and 79 % in New Zealand and 112 % in Sweden, both countries with low population densities. The talk will explain these striking Anglo-German differences in terms of key institutional differences, particularly in the supply of land, the nature of credit markets, taxation and tenure structures.
The differences between Germany and the UK have deep historical and cultural roots. The talk will explain why these differences, whose relevance has been overlooked by standard macroeconomics, matter. They have profound economic implications, including for intergenerational justice, inequality, macroeconomic policy, financial stability, and the transmission of monetary policy.