Grantham: “Day of reckoning” coming for global housing markets


Investment legend Jeremy Grantham has labelled the pandemic global property boom the “fifth great bubble of the modern era” and has warned of an impending global property bust as central banks ‘normalise’ interest rates:

Grantham is convinced that we’re in the midst of a fifth great bubble of the modern era, following the Wall Street crash of 1929, the Japanese asset bubble of 1989, the dotcom blowup in 2000, and the Global Financial Crisis of 2008.

He argues that both stocks and the housing market have been lifted to unsustainable levels owing to speculation from investors and unsustainably loose monetary policies from the Federal Reserve.

[Grantham] warned late last year that a “day of reckoning” for the housing market would come.

Now, with interest rates for a 30-year fixed-rate mortgage rising to 5.27% this week, their highest levels since 2009, he sees that point coming ever closer.

Grantham’s concerns are justified. House prices across the world’s housing markets soared over the pandemic, dwarfing the run up to the 2000s Global Financial Crisis (GFC):

Global house prices

Global house prices soared over the pandemic.


The boom in prices was driven by stimulatory monetary policy and record low interest rates from the world’s central banks.

Now, with inflation soaring everywhere, central banks are withdrawing quantitative easing and beginning to lift policy interest rates:

Major economy policy interest rates
Advanced economy policy interest rates

This tightening cycle still has a long way to run and could end up doubling average mortgage rates from their pandemic lows.

The obvious risk is that central banks will tighten too far and cause a synchronised global house price crash and potentially a GFC-style global recession.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.