For decades, property investors have viewed real estate as one of the safest ways to build wealth. However, according to Professor Michael Hudson, today’s housing market is undergoing a profound structural transformation that extends far beyond the normal property cycle.
In a recent interview with Shepeard-Walwyn’s very own Johnathan Brown, Professor Hudson, a world-famous economist and economic historian, argued that understanding the future of real estate requires looking beyond housing itself and examining the financial system that drives property prices.
In his view, real estate is no longer simply a market governed by supply and demand. It has become a by-product of modern finance. And the reason why he thinks this is why I’m so keen for you to listen to it.
One of Professor Hudson’s central arguments is that property prices are increasingly determined by the amount of debt banks are willing to create. As lenders offer larger mortgages, buyers can bid more aggressively for homes, pushing prices higher.
Rather than reflecting upon the intrinsic value of a property, housing prices increasingly reflect the availability of credit.
In Professor Hudson’s view, understanding bank lending is just as important as analysing housing supply and demand.
This debt-driven environment has significantly reduced housing affordability. Across many developed economies, younger generations are struggling to enter the property market.
Rising interest rates, higher insurance costs, and elevated property prices have made home ownership increasingly difficult, forcing many first-time buyers to remain renters for longer. In fact, your own children may still be living with you, even though they have a full-time job!
At the same time, wages have simply not kept pace with housing costs, creating further pressure on household finances.
Professor Hudson also points to a major shift in ownership patterns.
Instead of homes being purchased primarily by families, it is large institutional investors and private equity firms becoming the dominant buyers in many markets.
Companies with access to cheaper capital can often outbid individual purchasers, acquire entire portfolios of residential properties, and treat housing as a financial asset rather than simply a place to live.
As institutional ownership expands, rental markets become increasingly influenced by corporate investment strategies instead of local housing demand. For many households, this contributes to rising rents and fewer opportunities to own property.
