High property prices kills productivity

The Economist has published an interesting report explaining how rampant house price inflation across the developed world has diverted capital and resources away from the real economy and stifles productivity:

In recent years another strand of research has emerged, which, rather like the political economists of yore, attributes many long-standing economic ills to land. It explores how high and rising land prices affect lending, investment and ultimately productivity…

The worrying conclusion is that high and rising property prices can also have damaging economic effects, by crowding out productive investment and leading to a misallocation of capital. In the most extreme cases, inflated land prices may already be the cause of a protracted slowdown in productivity growth…

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