Mad markets and property bubbles

Shown in 2009, The City Uncovered with Evan Davis is shocking to watch and look back at what actually happened worldwide with unstable markets, crashing currency and commodity prices and the loss of millions of pounds.

With markets created in the 17th century, you could never predict what would actually happen many years later. They started as simple stock sharing, with haggling and price discovery. Becoming more organised, stock markets grew with products traded daily. From beavers' testicles (?!) to oil, products have changed wildly since the 17th century.

Focusing on the United States housing market, as mentioned by Evan Davis, growth was modest but steady between 1995 and 1999. The housing bubble was created in 2000 when the stock market crashed and new loans were available. An important thing to remember is that the housing market was praised for creating wealth and helping people to gain assets and help the economy grow by borrowing money. With increasing house prices, people wanted a piece of the pie.

Then came the housing market crash in 2007. Many lenders and banks filed for bankruptcy including Lehman Brothers. The stock market then had its worst week ever losing $8.4 trillion. The crash of the banks and stock market had a bigger impact on society. Unemployment rose and the US had over 3 million foreclosure filings in 2009.

Moving onto Australia, and echoing warnings of what happened to the United States, the OECD has advised that with a 250% increase in house prices since the 1990's, Australian banks need to limit mortgage lending and avoid risky loans. Household debt in Australia has also risen and if the government does not intervene, the hint of a slowdown in Australia's housing market could create wider problems in the economy.

The documentary also focuses on the UK, especially London and the focus on property. It would be great to say things have improved loads since the documentary, but this is not the case. Home ownership is decreasing year on year, with people only being able to afford to rent homes. Shockingly, over 50% of households are renting already in London. Even with the housing crash, house prices have risen by around 7% every year since 1980, adding to the huge property bubble. This bubble can only be maintained with increasing government support.

With the snap general election announced last week and Brexit looming over us, it will be interesting to see how the property bubble survives.