In his 2005 book, Everything was Forever, Until It Was No More: The Last Soviet Generation, Alexei Yurchak introduced the term ‘hypernormalisation’.
The book concentrated on the circumstances that existed in the Soviet Union during the time following Stalin but before perestroika.
Yurchak contends that, although everyone was aware of the system’s flaws, politicians and citizens were consigned to upholding the pretence of a well-functioning society because no other options could be envisioned.
Over time, pervasive fakery was accepted as real and thus became a lived reality. Yurchak labeled this phenomenon hypernormalisation.
Something similar has been at play in real estate. Over the last decade and a half, property investors have become hypernormalised to extremely loose monetary policy.
it is hard to overstate how pervasive the impact of persistently expansive monetary policy has been.
“Lower discount rates and cheap debt have supported higher pricing”
Most directly,lower discount rates and cheap debt have supported higher pricing. Furthermore, compressed yields on low risk, liquid debt instruments have meant asset allocators have favoured real estate as they search for income. In addition, parts of the occupier market have been supported by cheap capital. Plentiful equity has spurred growth in the technology sector, for example, while favourable conditions for borrowers have enabled some weaker companies to survive.
Everyone knew this could not last forever, but had to act as if it would until it stopped. Now it has.
