Thanks for all your reasons, let me go deeper...

Taking a consensus, most of you believe that high inflation will lead to higher rate and which subsequently lead to mortgage unaffordability. Some also suggest that high mandatory costs in life such as food price may lead to avoidance by people to spend on real estate. All these reasons make sense. But they make sense only for the short and mid term, i.e., from 5-7 years. Now, let me go deeper, how about for very long term, >10 years. If high inflation has doubled or tripled the food price, doubled or tripled the educational cost, doubled or triple the utility cost, and gas cost, doubled or tripled the renting cost..., will housing price remain cheap? Is housing asset or land asset so unique that it will be singled out from general inflation rise?

I think not. Because, for the short term, higher inflation may exert pressure on housing asset price, but if you extend the time long enough, housing price should not remain cheap since every other commodity price has caught up with it, especially the rental cost. Eventually, housing/land cost will go up as well.

Now, look at China, it's experiencing the world's highest and fastest inflation growth, at the same time, high inflation did not stop housing price increase at all. Housing price is actually leading China's inflation rush.

I bet Greenspan is still correct. Upon further thought, I think Greenspan is right on "high inflation->low housing price" for a short to mid term horizon. He did not mean this for long term. Then, every thing makes sense.

所有跟帖： 

• in the long term, we are all dead. -tafa- ♂ (0 bytes) () 09/17/2007 postreply 21:29:39

• True, but not that long, I was talking about 10 years -miat42- ♂ (49 bytes) () 09/18/2007 postreply 08:06:49

• China's salary has been growing faster than inflation. -cultuslake- ♂ (263 bytes) () 09/17/2007 postreply 21:44:36

• But that still hasn't answered the question: -miat42- ♂ (135 bytes) () 09/18/2007 postreply 08:05:27

• housing is increasing defensively in inflation env -longtermInvestor- ♂ (343 bytes) () 09/17/2007 postreply 23:27:12

• 回复：Thanks for all your reasons, let me go deeper... -edufmcn- ♂ (1585 bytes) () 09/19/2007 postreply 14:08:27