The Shock of Sweden's Housing Market Is Hitting the Country's Currency • Hacker News Board

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#191

Post by cc81 » Wed, Nov 15, 2017, 5:24 PM UTC

staticelf wrote: post #24

alkonaut wrote: post #10

There are tons of things inflating house prices. The most important for Sweden are - Deduction of interest expenses from income tax. - Too long mortgages (100 years or more) means nominal prices are high which add to the risk - Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's). - Rent control of almost all flats, meaning no one wi…

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

It has not been that much of a price change and while it will of course affect some it has not been the driver. It is not THAT difficult to get an apartment in the shitty areas where immigrants want to live but those who buy apartments won't buy in those areas anyway.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#192

Post by opportune » Wed, Nov 15, 2017, 5:24 PM UTC

lisper wrote: post #107

opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

> High housing prices are great for those who already owned houses Not really. Rising prices (not high prices) are great for people holding houses as investments . But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else. my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too bi…

Capital gains is only applicable when you sell the house and it's not your primary residence, or if you made a ton of money on it. And it's only a tax on the appreciation of the house, not its market value.

Real estate agent fees are only applicable on x% of the value of the house you sell.

Higher property taxes do stink but are not applicable after you sell the house.

I'm not sure why you can't afford to move. Have you talked to a tax specialist or a financial advisor? If you bought a house at X and sold it at 2x, even if you haven't paid any of the principal of your mortgage(if you have one), you would likely pay a maximum of ~25% of X between capital gains (if you own multiple homes) and real estate agent fees. So you still made 75% of X from appreciation. I don't really understand what you think your problem is.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#193

Post by lisper » Wed, Nov 15, 2017, 5:25 PM UTC

ttul wrote: post #159

lisper wrote: post #155

Earlier quoted context omitted.

> if it's your primary residence you get capital gains relief on the first $500k. Yes, I know. But our appreciation is substantially more than that. The higher it goes, the more expensive it becomes to make a move. > which is less impactful since you've already made a profit on it Only if we move to a less expensive area. If we make a local move, that "profit" just gets rolled in to the next house. There's no way to…

Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.

I'm not asking anyone to feel sorry for us. I'm just pointing out that rising prices are not a panacea for owner-occupied primary residences. The result is bad for everyone because people like us end up staying in houses that are too big. That takes housing stock off the market and drives prices up even further. That's good for investors, but bad for everyone who wants to buy a house to live in.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#194

Post by akoncius » Wed, Nov 15, 2017, 5:26 PM UTC

alkonaut wrote: post #84

charlesdm wrote: post #80

Earlier quoted context omitted.

I'm assuming that $80k/year is gross? Given Sweden has high income taxes, borrowing say $800k on a $40k net salary (for a house!) seems like extremely bad financial management. Which sane person who is good with money does that? That sets you up for a life of misery (and not unrealistically, an underwater house during your lifetime).

Yes gross. $80k gross is around $53k net (depends on where you live but roughly). Now, remember that reason we are in this mess is because interest rates are so low. We still have pretty low living costs. Our $1M house at 80% is pretty cheap, due to low interest rates. Now, everyone knows interest rates can and will be higher in the future, but people have to buy on the current market regardless (And everyone seems t…

"And everyone seems to accept to have less spending money when interest rates double or triple" another angle to look at this phrase would be "people don't see other option". Another option could be renting, but then there are many downsides - you are wasting rent money on temporary living instead of paying for your own house. Another downside at least in my country is difficulty to live normal life in rented apartment - usually there are restrictions (from landlord) to not own a pet, or they refuse to rent apartment for young family with babies. So people are kind of forced to purchase apartments, and ususally the need is to live in city where employment is highest, otherwise you will be unemployed or your expenses on commute will be the same as difference in loan payment which you saved with cheaper purchase.

I am waiting (and renting) for "good time" to purchase apartment, and it's more than five years like that and I don't see any signs for hope anytime soon, and you realize that time goes by and you are getting older and your timeframe for which you can take loan is shrinking anyway, so situation becomes a bit desperate I would say.

So decision making with real estate is not only rational but emotional too.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#195

Post by yawz » Wed, Nov 15, 2017, 5:27 PM UTC

ttul wrote: post #159

lisper wrote: post #155

Earlier quoted context omitted.

> if it's your primary residence you get capital gains relief on the first $500k. Yes, I know. But our appreciation is substantially more than that. The higher it goes, the more expensive it becomes to make a move. > which is less impactful since you've already made a profit on it Only if we move to a less expensive area. If we make a local move, that "profit" just gets rolled in to the next house. There's no way to…

Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.

> You’ve made more than $500K

Nope! This is all speculative until you need to "sell & move". If you want to move to another place in the same area, guess what, you've probably made nothing. With all the taxes and fees that you have to pay on the sale price you can't buy the equivalent of your house. You can only capitalize on that appreciation if you move somewhere considerably cheaper.

Not only that, the owner faces higher (in some cases much higher) property taxes due to increasing house prices, which is totally out of their control.

I'm not suggesting that they're in a bad spot. It's just not the "jackpot" that your post is suggesting.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#196

Post by lisper » Wed, Nov 15, 2017, 5:28 PM UTC

tostitos1979 wrote: post #179

lisper wrote: post #167

Earlier quoted context omitted.

Suppose we bought our house for $1M and now it's worth $2M. We have to pay 25% cap gains (federal + state) on $500k so it costs us $125k to move to a house of equal value. If prices were stable, we could move without taking that hit. The higher prices go, the higher the cost of moving.

You are better off unless you bought the large house for cash. Otherwise, you made a big gain in leveraged terms.

What you say is true, but it misses the point, which is that big gains only help you if you actually cash out. If you're making a lateral move, or downsizing in the same area, it doesn't matter whether you're leveraged or not. A loss is still a loss.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#197

Post by Danihan » Wed, Nov 15, 2017, 5:28 PM UTC

opportune wrote: post #192

lisper wrote: post #107

Earlier quoted context omitted.

> High housing prices are great for those who already owned houses Not really. Rising prices (not high prices) are great for people holding houses as investments . But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else. my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too bi…

Capital gains is only applicable when you sell the house and it's not your primary residence, or if you made a ton of money on it. And it's only a tax on the appreciation of the house, not its market value. Real estate agent fees are only applicable on x% of the value of the house you sell. Higher property taxes do stink but are not applicable after you sell the house. I'm not sure why you can't afford to move. Have…

Thank you -- this post did not add up to me either.

Do a FSBO if you're that worried about brokerage fees.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#198

Post by opportune » Wed, Nov 15, 2017, 5:29 PM UTC

dragonwriter wrote: post #74

opportune wrote: post #65

Earlier quoted context omitted.

In this case home prices rose because it became cheaper to make mortgage payments on a house. People were willing to spend the same mortgage payment as before, so the net effect is that housing prices rose. Salaries don't necessarily rise at the same rate as inflation. If they did, there would be 0% real growth in the economy. Inflation is usually measured by watching the prices of a basket of goods: if those goods'…

> Salaries don't necessarily rise at the same rate as inflation. If they did, there would be 0% real growth in the economy. You are confusing “salaries” with “output”; salaries (or even domestic incomes in total, which involves more than salaries) growing at the rate of inflation can occur with negative or positive real growth. Zero real growth means output growing at the rate of inflation. (National economies aren't…

True, but for practical purposes salaries (or the mean of salaries + returns from investments) closely approximate output. In any case it should be clear that salaries and inflation aren't directly linked. Salaries should (generally) increase slightly more than inflation as productivity increases over time

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#199

Post by Danihan » Wed, Nov 15, 2017, 5:30 PM UTC

el_benhameen wrote: post #172

ttul wrote: post #159

Earlier quoted context omitted.

Awww poor baby. You’ve made more than $500K, much of which will be untaxed, simply by owning a house. Jesus fucking Christ. Cry me a river. Most people would trade their arm in for that kind of leveraged gain.

You arguably have a point (so does the parent), but this isn’t the way to express it in a respectful discussion.

I dislike the notion that discourse needs to be respectful at all times.

Discourse shouldn't be baselessly disrespectful, sure.

But the robotic, tsk tsk, shaming attitude that gets thrown around on forums whenever someone expresses any negative emotion gets old too.

In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#200

Post by pimmen » Wed, Nov 15, 2017, 5:30 PM UTC

staticelf wrote: post #24

alkonaut wrote: post #10

There are tons of things inflating house prices. The most important for Sweden are - Deduction of interest expenses from income tax. - Too long mortgages (100 years or more) means nominal prices are high which add to the risk - Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's). - Rent control of almost all flats, meaning no one wi…

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

Increase in immigration absolutely increases the demand for housing, but it's often not enough to increase the housing prices alone. Look at what happened in the early 90s during the Yugoslav Wars, Sweden took in more refugees than ever before in history yet the housing prices went down and threw the country into economic recession because of all the investments into real estate.

The financial regulations (or lack thereof) are far more responsible. They're present in all of Sweden's housing crises, this one included. It's the same when you look internationally.