Category: Finance

How Vladimir Putin created a housing bubble

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Mortgages used to be a tough sell in Russia. Decades of Soviet propaganda, which denounced credit as an unbearable burden, had an effect. Even after the end of communism, Russians still referred to mortgages as “debt slavery”, preferring to save until they could buy their homes outright. Vladimir Putin, the country’s president, has spent two decades trying to convince his citizens to take a different view. In 2003, during his first term, he explained that mortgages might help solve “the acute problem of housing” facing Russians. His plea fell on deaf ears.

He is now having more success—and all it took was a heavy dose of statism, as well as the invasion of a peaceful neighbour. Over the past few years, the number of Russians taking out mortgages has soared, owing to a generous programme of state subsidies for buyers of new-builds. Mr Putin may have got more than he bargained for, however. The state’s subsidy binge has stoked an ultra-hot property market, sending house prices soaring. As such, the Kremlin has found itself picking up a giant and fast-growing bill.

The rich world revolts against sky-high immigration

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Immigrants are increasingly unwelcome. Over half of Americans favour “deporting all immigrants living in the US illegally back to their home country”, up from a third in 2016. Just 10% of Australians favour more immigration, a sharp fall from a few years ago. Sir Keir Starmer, Britain’s new centre-left prime minister, wants Britain to be “less reliant on migration by training more UK workers”. Anthony Albanese, Australia’s slightly longer-serving centre-left prime minister, recently said his country’s migration system “wasn’t working properly” and wants to cut net migration in half. And that is before you get to Donald Trump, who pledges mass deportations if he wins America’s presidential election—an example populist parties across Europe hope to follow.

Why investors have fallen in love with small American firms

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Believe it or not, corporate America still makes room for the little guy. Around half of working Americans are employed by a firm with less than 500 workers. Nine in ten banks are community institutions that hold less than $10bn in assets. This rather parochial picture, however, is not reflected in the country’s stockmarket, where the falling number of public companies and extreme concentration of value are a concern. Among America’s 3,000 largest public firms, the biggest 1,000 account for 95% of total value. The next 2,000, which form the Russell 2000 index, are collectively worth less than Apple, the world’s most valuable company.

YIMBY cities show how to build homes and contain rents

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Houses in Bouldin Creek, a neighbourhood in Austin, Texas, are cavernous, but occupy only a small portion of their plots. Rules known as the “McMansion ordinance”, intended to preserve the area’s character, ensure there is plenty of space between them. Architects must squeeze the design of any new home into an imaginary tent rising five metres from the plot’s edge, then angling in at 45 degrees. The rules seek to prevent sprawling developments from replacing small houses. Instead, the cost of complying with them has ensured that only large, expensive homes are viable.

YIMBY cities show how to build homes and lower rents

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Houses in Bouldin Creek, a neighbourhood in Austin, Texas, are cavernous, but occupy only a small portion of their plots. Rules known as the “McMansion ordinance”, intended to preserve the area’s character, ensure there is plenty of space between them. Architects must squeeze the design of any new home into an imaginary tent rising five metres from the plot’s edge, then angling in at 45 degrees. The rules seek to prevent sprawling developments from replacing small houses. Instead, the cost of complying with them has ensured that only large, expensive homes are viable.

Things are now starting to change. Alongside Auckland in New Zealand, Austin has become a test case for housing deregulation. For YIMBYs, activists who say “yes in my backyard” to development, reforms in the cities are shining examples to be followed elsewhere. There are signs such campaigners are winning the debate in the anglosphere. Britain’s new Labour government has made “getting Britain building again” a central aim; a push for affordable housing is core to the appeal of Canada’s opposition Conservative party. As case studies for the effectiveness of YIMBY reforms, both Austin and Auckland show signs of success. Yet they also show that changes are slow to take effect and may, on their own, have a modest impact.

Stocks are on an astonishing run. Yet threats lurk

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All around the world, stockmarkets have been rising at a breakneck pace. Whether you are in America, Europe, Japan or India, share prices listed on a bourse near you have spent most of this year setting fresh records, only to break them again straight away (see chart 1). America’s S&P 500 index of large companies has rocketed by nearly 60% since a trough in 2022. True, Chinese investors are in a funk. But they cut lonely figures: exclude China from MSCI’s index of emerging-market shares, and the remainder have been clocking rapid gains, too.

Chart: The Economist

To a certain extent, this record-smashing is to be expected. Dump the losers periodically, as benchmark indices tend to, and the history of equities is one long (albeit frequently interrupted) march upwards. Bear markets and crashes abound, but once prices recover to set one new high, a stream of others usually follows. This has led global stocks to deliver an annualised real return of 5.1% since 1900, and American ones of 6.5%. Worry all you like that the narratives being spun around today’s boom—from techno-euphoria in America to a corporate-governance revolution in Japan—are overblown, and that a reversal is coming. Those seeking riches should simply set aside such concerns and invest for the long run.