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I always wonder how big the impact of housing as an Investment Class has on the housing market.

Without any data to back this up, I feel that much of the price inflation around the world housing markets is due to money flowing into the housing market that is fleeing countries, taxation or instability in general. Can anyone more knowledgeable refute this?

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I've never understood why people assume that sort of investment is going to be going to the housing market in particular, especially when it goes along with complaints of absentee foreign landlords and unoccupied housing. Surely even if you're fleeing instability you still want to make the best investments you can, and refusing to rent property or investing in already overactive markets rather than somewhere else is just leaving money on the ground. I could definitely be wrong, but I suspect many people assuming otherwise have neither data nor theory to back that up.

I'm no expert, but I think this is a "known bug". Russian oligarchs buying property in London, for instance, is a big reason for that market's insane prices.

One 'solution' is property taxes, which disincentivizes buying property that you leave unoccupied. Planet Money had a good episode on the property tax and how it's a surprisingly effective tax.

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