New York Federal Reserve Bank President John Williams said in May, "I feel this is pretty much a Goldilocks economy," and in July, Federal Reserve Chair Jerome Powell said, “I sleep pretty well on the economy right now. This year, inflation is rising as desired and is reaching the target (Figure 2).Īfter its August 1 meeting, the Federal Open Market Committee stated that the labor market has continued to strengthen and business fixed investment as well as household spending have grown strongly. The Fed had repeatedly projected that inflation would rise toward its 2 percent target only to find it falling short. In the first half of this year, GDP growth averaged 3.2 percent at an annualized rate. Īfter the new Congress and Administration began, the Fed raised its GDP forecast and did so again after passage of the Tax Cuts and Jobs Act (Figure 1). The Fed had projected a rebound with annual real GDP growth reaching upwards of 5 percent, only to see it failing to reach even 3 percent during the Obama years. The pro-growth turn of economic policy since the 2016 election has economic performance finally recovering as the Federal Reserve originally predicted after the recession. Under that scenario, Greek real estate prices could converge to our estimate of “fair” or “equilibrium” level no sooner than 2027.GDP growth has recovered to its historical average, job growth is strong, unemployment low, and inflation moderate-a scenario New York Federal Reserve Bank President John Williams has described as a “Goldilocks economy.” Overall, looking at the big picture, we anticipate that- starting from a low base- the Greek real estate market can grow hand-in-hand with a robust economy for a number of years. Strong economic growth following the post-Covid return to normalcy will ameliorate this brief valuation bump. Goldilocks economy can be restated as why has inflation been so low relative to changes in wages and why. Yet, the combination of the unavoidable decline in domestic incomes (especially on the corporate sector) with the robust real estate price acceleration means that temporarily, valuation metrics such as the affordability ratio will look elevated. Stated another way, the real questions about the.Furthermore, given the extremely positive prospects of the Greek economy, we project that the Greek real estate price indices (residential and commercial) can keep growing to the tune of 6% in the near future until they settle down to a less scorching – yet fully respectable – pace of 3% p.a.First, given the positive outlook for the Greek real estate market, which is based partly on our “goldilocks” outlook and partly on structural reforms (such as “golden visa” and tax-base transfer for wealthy individuals) which aim on making the Greek real estate market more attractive to foreign investors, Greek real estate prices for both commercial and residential properties kept growing despite the decline in incomes and economic activity.That valuation approach has had three direct implications: Market participants, by and large, side-stepped the 2020 decline in GDP and disposable income and based their valuations on their assessment of the long-term potential growth of the Greek real estate market. The same reasoning was also applied to the real estate market. Instead they switched to using 24 month forward EPS in their valuation models to estimate the “fair value” of equities. Hence, in the stock market analysts and brokers stopped using 12-month forward Earnings per Share(EPS) to value stocks. After an initial shock, most analysts realized that Covid-19 recession was going to be a transitory phenomenon and economic activity would, sooner rather than later, return to its previous trajectory. In retrospect, the real estate market reacted much like any other financial market last year. Somewhat surprisingly for most analysts, the real estate market registered a remarkable “decoupling” from economic activity during 2020.
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