What is the future of the rich world’s housing markets?

MOORE’S LAW states, roughly, that computing power doubles every two years. Time and again experts predicted its demise—surely, they reasoned, computers cannot continue getting exponentially more powerful. Yet it held for at least half a century.

More people are starting to wonder whether housing may have its own version of Moore’s law. Over the past 70 years global house prices have more than quadrupled in real terms. They are far beyond their pre-crisis peak. It may seem mad, but a paper from David Miles, formerly of the Bank of England’s monetary-policy committee, and James Sefton of Imperial College London finds that “in many countries it is plausible that house prices could now persistently rise faster than incomes”. A growing population and rising incomes increase demand for housing, which runs up against a fixed supply of land in areas where the good jobs are, and limits to improvements in transport speeds.

As this report has argued, high property prices are associated with less economic dynamism and more financial instability. But although Messrs Miles and Sefton say that ever-pricier property is “plausible”, they do not say it is inevitable. To keep housing costs down in the long term, governments need to get three things right.

The first is better regulation of housing finance. Switzerland comes close to...

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