Jon Cunliffe: Housing – the quiet decade

Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at the Law Society Property Section Convention, London, 20 May 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

One of the many unusual features of the Covid-driven economic contractions in advanced economies has been the behaviour of housing markets. Housing markets typically slow and house prices fall in severe economic contractions.

But despite very adverse economic conditions after the initial Covid lockdown shock last spring, housing markets have been buoyant in many advanced economies and house prices have been rising. House prices grew by 5.7% on average across advanced economies in 2020, the sharpest increase since 2007.

Of course, what we have experienced over the past 12 months or so has been very different to a 'normal' business cycle contraction or even to the more extreme contractions that follow financial busts. Economic developments have been driven by wholly exogenous health developments and governments have provided massive fiscal support to incomes, employment, the corporate sector and in some cases like the UK, to housing markets.

It remains striking however, that following some of the sharpest economic contractions in modern history and amid great uncertainty and indeed, initially fear, about the future, housing markets have been strong.