This working paper provides an empirical overview of how housing-centred financialization developed across space and time. This is important because we still lack a comprehensive understanding of the geography of countries experiencing a debt-led housing bubble. Our data, collected within the frame of the Real Estate/ Financial complex (REFCOM) research group, show that the disparities among the countries are of multidimensional character. They include not only housing finance, but also demographic and institutional elements and need to be considered in their country-specific differences.
The great financial crisis of 2007/08 reminded us of the destructive powers of the unrestrained buildup of mortgage debt. The collapse of the archetypical bubble-nations Spain and Ireland, and the home of the subprime loans, the US, took most scholars and policymakers by surprise. In retrospect, we should have known. History taught us that manic phases end in crashes. When policy makers argue, ‘this time is different’, we should know we have a problem.
As the financial crisis spread and morphed into the Euro crisis, we entered the unchartered territory of ‘unconventional monetary policy’; less attention was given to growing private debt-levels, mounting off the radar. This time, however, it seems, is different. This time housing bubbles are being blown in countries that missed the last round, as well as in countries where the housing-centered model of financialization has been firmly established. The difference is that the debt-led accumulation model based on residential real estate is spreading globally, including the Global South and, most astonishingly, in China. Now it is the hegemonic global growth model and not just a handful of extreme cases that exemplify the broadening of the deb-led economic model
Therefore, this working paper focuses specifically on the relations between housing and financialization. We attempt to provide an empirical overview of issues explored previously in an article published in Competition and Change. In this article, myself and Manuel Aalbers assessed why the impact of the ‘global wall of money’ had been uneven and varied across models of residential capitalism. Our analysis moved beyond housing as a vehicle for financialization and instead focussed on the systemic linkages between housing as store-of-value, overaccumulation and the debt-led economic model. This working paper highlights the cross-borders differences of housing and finance and how they shifted in time.
Rodrigo Fernandez is a postdoc in the Department of Geography & Tourism at KU Leuven. He is also an associate researcher and campaigner at the Dutch NGO SOMO, a member of the Tax Justice Network, working on tax avoidance, tax havens and shadow banking.