Property cycles

Purpose– The purpose of this paper is to review what is known about property cycles following the financial crisis of 2008.Design/methodology/approach– The method is to review the literature on property cycles published since the 1930s, to examine the extent to which endogenous causes have been identified as distinct from exogenous factors that may have produced cyclicality resulting from weak adjustment mechanisms but not cycles.
Findings– Whilst there is broad consensus that the property market has delays in adjustment which produce oscillations resulting from external shocks, it is more difficult to identify endogenous causes of cycles, though there are some possible candidates, notably technical progress.Practical implications– The slump after 2008 has cost savers and taxpayers dear, so better means of predicting cycles so that policy makers can mitigate them is desirable.
Originality/value– The debate about whether property cycles result from exogenous shocks or endogenous causes is in danger of being lost sight of. If the former, then the property industry is a channel through which external factors feed through to the economy, albeit magnified by weak adjustment factors. If there are endogenous causes, then policy makers would be unwise to overlook their potential destabilising impact on the economy.