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

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

#271

Post by darawk »

Danihan wrote: post #249
darawk wrote: post #241

Earlier quoted context omitted.

> In any case, complaining about having to pay capital gains tax on gains OVER $500k really is the ultimate first world, privileged problem. Almost every complaint levied on this forum is a first world problem. Complaining about the ergonomics of a programming language is a first world problem. And secondly, he wasn't complaining , he was describing the economics of his choices. What is infinitely more toxic than 'co…

>What is infinitely more toxic than 'complaining' about first world problems That's just like, your opinion man. >Complaining about the ergonomics Look, complaining about work is a typical first world problem, sure. And of course we're all lucky to do the work we do and not live in [wherever.] Complaining about 20% taxes on $200k of a ~$700k windfall is truly more like a .00001% issue and is pretty obtuse by any meas…

> You wouldn't raise an eyebrow, or have any negative reaction to someone making $400k / year bitterly complaining that they have to pay taxes on it? I don't know anyone who wouldn't think that was obnoxious.

Where are these bitter complaints? He commented to say that rising housing prices weren't good for him. He explained why. That isn't a complaint. He didn't say "I deserve this money from my rising house price!". He didn't say "the world is so unfair to me". He just explained why this thing that people thought would be helpful to someone like him, was in fact, not helpful.

> Sort of, in a fairly facile and borderline deceptive manner.

What was facile or deceptive about what he said? He's absolutely correct.

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

#272

Post by ThrustVectoring »

jesusthatsgreat wrote: post #247

It's not just Sweden, it's almost everywhere (in the western world at least). It's almost entirely down to the effects of unprecedented quantitative easing over the past decade or so. When you print more money than you've ever printed before, it's only natural that the prices of things will rise as more people can afford to buy things. And even if more people can't afford to buy things, the money goes somewhere so it…

It's less about printing money and more about falling long-term interest rates (and thus, discount rates). Fundamentally, a house is worth the net present value of its use value. Lower discount rates means that more of that value gets pulled forward into its present valuation.

An equivalent way of thinking of it is that house prices are fixed by mortgages to rents - when mortgage payments are lower than rents, people buy houses and rent them out, pushing house prices up. Falling mortgage interest rates push mortgage payments lower at the same principle amount, which convinces people to buy and push up housing prices.

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

#273

Post by Retric »

lisper wrote: post #158
Retric wrote: post #154

Earlier quoted context omitted.

The first 500,000$ of capital gains are excluded when selling a primary residence jointly. So, if your net profit > 500,000$ yes it costs money, but if your actually downsizing then you will very likely come out ahead. Further, your new home is also worth more money in the event you move out of the area.

> if your net profit > 500,000$ It is. > yes it costs money but assuming you want to down size that should hardly be an issue. Why? A loss is a loss. What difference does it make if it comes out of your checking account or your home equity?

You also save that 500,000$ of appreciation when selling the second house. AKA, if house 1 gained 2 million and house 2 gained 2 million your better off than if house 1 gained 4 million.

Now, you can get into cash flow issues etc. But, with home interest being tax deductible and long term capital gains being below normal taxes your almost always better off over time to sell after a bubble than before.

PS: If your investment makes 4% and your mortgage is 5% then you have a net savings after taxes.

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

#274

Post by stuxnet79 »

grouseway wrote: post #201
pimmen wrote: post #189

Earlier quoted context omitted.

And this is the problem with Sweden; we got rid of the property tax, but we kept the capital gains tax meaning people are less incentivized to sell since the prices are rising anyway, meaning fewer houses end up on the market, meaning the prices rise. This is one of the many contributors to this crisis; high capital gains taxes for people selling their house, no property tax for people keeping it. Add to that our tax…

Canada has no capital gains tax on housing and it has similar housing inflation to Sweden. I would say people are frantic to buy a home in Canada because it's tax free and the alternative (stocks/bonds/etc..) isn't.

Is this really true?? I think if you are selling a home that is not your primary residence then there is some sort of tax but I'm not 100% sure of the details.

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

#275

Post by sliverstorm »

asabjorn wrote: post #248
sliverstorm wrote: post #168

Earlier quoted context omitted.

If you want to go on vacation, but you can go on a little bit of a nicer vacation if you wait until next spring... If your old washing machine still mostly works, the new one will be cheaper if you can get the old one to limp along for a while longer... People don't completely stop buying things; life must go on. But people would start to drag out purchases where ever they can. Have you ever put off buying a computer…

What seems to matter more is that there has been a productive deployment of capital that gives you a reason to buy a new product, and that you have discretionary income after housing cost and other fixed costs are paid. High housing costs are an incredibly unproductive use of capital unless it leads to building new supply and is therefore effectively a temporary incentive for developers to build more. Landlords on th…

productive deployment of capital

Right, and the economists argue a deflationary market makes capital scarce

High housing costs are an incredibly unproductive use of capital

Right; it seems desirable for housing costs to keep even pace with the rest of the market, and ideally stay close to depreciated replacement cost

And even when computers were improving significantly every year and prices went down people on average still increased their buying of new computers.

I still buy computers in the deflationary technology market, like everyone else. But because I am putting off purchases and cannot recoup my costs with a sale, I probably buy a lot less computing hardware than I would if, for example, improvements were still just as big but much less frequent. I'm not saying it would be better for the world if computers improved more slowly- but clearly market behavior would change.

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

#276

Post by contingencies »

expertentipp wrote: post #30
maxxxxx wrote: post #25

Earlier quoted context omitted.

Totally agree. It seems one of the factors that helped the US until the 90s was that housing was affordable so people could move around easily. A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead.

> A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead. You've just summarized the situation in Prague, Czech Republic.

Same in China.

Same in Australia.

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

#277

Post by draw_down »

baursak wrote: post #17

I don't get it. When prices are high, it's a housing crisis. When prices are going down, it's a housing crisis. It's almost as if news articles just need to be written regardless of the reason.

Yes, you don't get it.

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

#278

Post by hjnilsson »

rayiner wrote: post #135
phaemon wrote: post #104

Earlier quoted context omitted.

> Well, if you are increasing the population a lot But you aren't increasing the population "a lot", now are you? You linked to a graph that shows around 350,000 asylum seekers over 5 years. What percentage of Sweden's population is that?

It's over 3.5% of the total population, which is equivalent to the U.S. adding about a million people. Also note that they're going to be concentrated into relatively few urban areas, instead of being spread out over the entire country.

Uhh, would be US adding 10 million, not one million.

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

#279

Post by paganel »

expertentipp wrote: post #30
maxxxxx wrote: post #25

Earlier quoted context omitted.

Totally agree. It seems one of the factors that helped the US until the 90s was that housing was affordable so people could move around easily. A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead.

> A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead. You've just summarized the situation in Prague, Czech Republic.

Same in Romania. For the first time in my life (I’m 37 now) I heard a couple of acquantainces saying something like “We’re 20,000 Euros reacher now compared to last November, our apparment is now worth 90,000 euros compared to 70,000 euros last November”. This discussion happened this summer, since then I’ve heard at least a couple other different couples saying pretty much the same thing (only the sums were different). Never mind they their investments are a hell of a inliquid ones and that the banking rules can change anytime, just like that (like it happened after 2008), which would send the real estate market collapsing.

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

#280

Post by Retric »

wott wrote: post #211
dmode wrote: post #175

Earlier quoted context omitted.

If your house didn't appreciate you would not have any profits either. Very confused on what the issue is. Let's say your house is 1mn and stays 1mn. You have zero gains and pay zero taxes. Net cash in your bank = ZERO Now your house becomes 2mn. So you have 1mn profit, first 500K is exempt. And you pay 25% on your next 500k. Net cash = 750K. Are you suggesting that you would rather have zero dollars in your bank acc…

He does not want to fill his bank account and be homeless. He wants a house. To be bought with the same money. That does not go into the bank account but into the new house.

You can use that 750,000$ to buy anywhere else that's not inflated. If you want to buy a house in an inflated area you end up in the same situation as anyone else that wants to buy a house in an inflated area.

AKA, if a prison opened up next to their current house keeping property values the same then they would be strictly worse off.

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