Navigating Financialisation

The traditional concept of housing has undergone a profound transformation in recent decades.  Traditionally viewed as a place of shelter and security, homes are increasingly treated as commodities and financial assets, by global institutional players, that are to be bought, sold, and leveraged for profit.  By understanding the dynamics, policymakers and society can work towards reshaping housing markets globally, fostering a future where access to housing is a right rather than a privilege controlled by a select few.

Linking housing with finance has fuelled a global surge in house prices, intensified housing inequality and widened the wealth gap. Financialisation refers to the process by which housing is treated as a commodity—a vehicle for wealth accumulation and investment—rather than a fundamental social good.

Investors, including institutional funds, private equity, and real estate investment trusts (REITs), have increasingly viewed real estate as a lucrative asset class that can generate rental income or capital appreciation.  This shift has led to speculative buying that has reduced the available housing supply for potential homebuyers and inflated housing prices making it difficult for average people to enter the housing market.

The growing dominance of global financial actors in the housing market has its roots planted in the 2008 financial crisis.  Prior to the crisis, the prevailing narrative emphasised homeownership as a cornerstone of stability and prosperity.  Governments actively promoted homeownership through it policies and incentives.  This trajectory culminated in the global housing bubble that fundamentally altered the landscape of homeownership.

Major global financial institutions capitalised on the chaos that followed the crash, leveraging government support to seize opportunities presented by distressed real estate markets and acquire vast property portfolios.  Housing, once a shelter and a basic need, transformed into a commodity for financial speculation, concentrating power in the hands of global financial giants and consolidating their positions as influential players in the housing sector.

Widening wealth gaps, increased social stratification, and a growing disparity in housing opportunities are among the social and economic ramifications of the rising influence of the global financial actors. As these entities prioritise financial gains, the idea of owning a home is becoming a distant reality for a significant portion of the population.  This has led to an over-reliance on the rental market.

The financialisation trend has paved the way for global financial investors to exert significant influence over the housing sector.  Acknowledging the impact of these large property funds is a crucial step in the shaping the housing market of tomorrow.  While governments possess the tools to influence the housing market, the effectiveness of these interventions ultimately depends on political will.

In summary, the concept of housing has undergone profound transformation in recent decades.  Homes are increasingly treated as commodities to be bought, sold, and leveraged for profit.  While financialisation has brought opportunities for investment and innovation, it has also had significant implications for housing affordability on a global scale.  As the global investors consolidate their positions in the housing sector, the challenge for policy makers is to strike a balance between the economic forces driving commodification and the fundamental human right to adequate housing.