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Home ownership is the West’s biggest economic-policy mistake

economist.com

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Re: Home ownership is the West’s biggest economic-policy mistake

#471

Post by daemin »

milkytron wrote: post #439
daemin wrote: post #425

Earlier quoted context omitted.

One thing people seem to skip over is that once you have bought a house you will still need to pay many fees. Just owning a house isn't free, there will be property taxes, fees for services, and other actions that require money from you. In a lot of cases when renting these are taken care of by the landlord. So just the rent vs mortgage comparison (or rent vs no rent) is misleading at best, downright fraudulent at wo…

> In a lot of cases when renting these are taken care of by the landlord. The thing is, a landlord isn't likely to continue renting out if they're losing money. Typically, the money for services, maintenance, etc. comes from rent. The renter is indirectly paying for those, otherwise the landlord would be out of business.

Yes, the landlord is paying for those things out of the rent, but as another commenter has stated my point is that you cannot make a direct Rent to Mortgage comparison. As there are many other costs you end up paying as a home owner which you don't worry about when you're a renter.

Re: Home ownership is the West’s biggest economic-policy mistake

#472

Post by Nursie »

WalterBright wrote: post #454
Nursie wrote: post #440

Earlier quoted context omitted.

This still ignores that speculation can contribute to them, and can move the market. It's is not a rebuttal or an explanationa.

If speculators realize there's a bubble, they'll short it and thereby make money when it collapses. Shorting a bubble moderates its price rise.

And if they don't realise there's a bubble, but continue to add 'buy' side pressure?

Speculators are part of the market, not observers, and they absolutely contribute to rising prices, not just price discovery, because they add demand.

Re: Home ownership is the West’s biggest economic-policy mistake

#473

Post by keerk43 »

ClumsyPilot wrote: post #445
XorNot wrote: post #442

Earlier quoted context omitted.

Apartments have always been kind of a sucker's deal compared to houses though. Houses in almost any condition can still be worth a ton, because you the owner have complete control over the state of the building on the land (including, knock it down and put a new one in).

that because the laws in UK basically turn a apartment ownership into a indentured servitude - you pay 100 years of rent for the privilege of being bound to the place, taking the cost of any remedial works, having no stake in the land and on the hook for ground rent and any feed the management company dreams up In Czech Republic you actually own a share of the whole building and the land it stands on.

Owning a share of the building has its own issues as well though. If your neighbours suck and don't care about maintaining the building adequately, then you're basically out of luck. Even worse, at least here in Finland some older apartment buildings in smaller cities are worth too little to get funding from bank for larger renovations, effectively making them impossible to do unless every tenant is capable and willing of getting a personal loan.

I will never buy an apartment from reasons mentioned above. Just way too risky, at least with my own house it would be up to me what gets done and what doesn't.

Re: Home ownership is the West’s biggest economic-policy mistake

#474

Post by WalterBright »

Nursie wrote: post #472
WalterBright wrote: post #454

Earlier quoted context omitted.

If speculators realize there's a bubble, they'll short it and thereby make money when it collapses. Shorting a bubble moderates its price rise.

And if they don't realise there's a bubble, but continue to add 'buy' side pressure? Speculators are part of the market, not observers, and they absolutely contribute to rising prices, not just price discovery, because they add demand.

> they absolutely contribute to rising prices ... because they add demand

Speculators buy and sell, in equal measure. That's what makes them speculators. It's a net zero.

If they bought and held, they'd be investors.

Re: Home ownership is the West’s biggest economic-policy mistake

#475

Post by ckdarby »

bradlys wrote: post #388
deepstack wrote: post #245

Earlier quoted context omitted.

Upvote! Private property ownership and intergenerational wealth transfer is the foundation of middle class, and bigger middle class leads to better education for the masses, and a more democratic society!

Why do people want intergenerational wealth transfer? Anytime we talk about billionaires passing down large sums of money to their children and creating dynasties out of it - it’s a bad thing. Yet, middle class to upper middle class does it and it’s a good thing? I see it as problematic. Keeps the ground unlevel.

To allow the next generation the luxury of not being priced entirely out of the market.

The difference as you go down the wealth classes hits a point of, being able to afford a home at all or never being able to purchase a home.

Re: Home ownership is the West’s biggest economic-policy mistake

#476

Post by piva00 »

tuukkah wrote: post #257
jorvi wrote: post #221

Earlier quoted context omitted.

> while you are under 40 This seems such a weird condition to add. Someone who doesn't earn much but saves up over 22 years for a house has to pay stamp duty on his first house, but someone privileged who can buy a house when 30 years old doesn't?

I fully agree. I guess the intention may have been to make people hurry up buying or building while young. One of the major political parties here (Centre Party, the agrarian-liberal party) wants people to live outside of the cities. Finnish cities are so small that it's easy to commute from a place with plenty of cheap land and thus it's possible for most people to buy or build a house there if they want to.

Isn't this the same basic principle that drove American suburbia? Expand the outskirts with building houses on bigger plots of land and empty the city centers. It just seemed to have killed city centers in the US.

Granted that Finland has a very different culture (disclaimer: I live in Sweden) and we aren't in the 50s anymore to invest heavily on a car-centric society but incentivising people to move away from city centres can have unpredictable consequences 20-50 years down the line.

Re: Home ownership is the West’s biggest economic-policy mistake

#477

Post by ClumsyPilot »

keerk43 wrote: post #473
ClumsyPilot wrote: post #445

Earlier quoted context omitted.

that because the laws in UK basically turn a apartment ownership into a indentured servitude - you pay 100 years of rent for the privilege of being bound to the place, taking the cost of any remedial works, having no stake in the land and on the hook for ground rent and any feed the management company dreams up In Czech Republic you actually own a share of the whole building and the land it stands on.

Owning a share of the building has its own issues as well though. If your neighbours suck and don't care about maintaining the building adequately, then you're basically out of luck. Even worse, at least here in Finland some older apartment buildings in smaller cities are worth too little to get funding from bank for larger renovations, effectively making them impossible to do unless every tenant is capable and willi…

Certainly its a difficult subject, but I prefer owning something, rather than leasehold "renting for 100 years" as if we still have feudalism

Re: Home ownership is the West’s biggest economic-policy mistake

#478

Post by Nursie »

WalterBright wrote: post #474
Nursie wrote: post #472

Earlier quoted context omitted.

And if they don't realise there's a bubble, but continue to add 'buy' side pressure? Speculators are part of the market, not observers, and they absolutely contribute to rising prices, not just price discovery, because they add demand.

> they absolutely contribute to rising prices ... because they add demand Speculators buy and sell, in equal measure. That's what makes them speculators. It's a net zero. If they bought and held, they'd be investors .

Helping to push up prices as they do so, attracting more speculators. That's not a net zero.

They also hold what are limited resources for a non-zero amount of time, reducing supply in aggregate. More speculators, more supply constraint.

This is not some sort of idealised marketplace where people can dip in and out without any effect.

Re: Home ownership is the West’s biggest economic-policy mistake

#479

Post by neilparikh »

bena wrote: post #379
neilparikh wrote: post #304

Earlier quoted context omitted.

> There is nothing about the previous "landed" status of my neighbors that will affect the value of my property. Suppose everyone who wanted to had the ability to own land in New York (obviously not possible geometrically, but for sake of argument). Do you think that property in New York would still be worth the same? Land only has a buying price/rent because there is an unmet demand. This is a principle economists r…

The problem is that it's not logistically possible. The very thing you want us to ignore for the sake of argument is the crux of the issue. New York is a port. Ports become cities, because access to the rest of the area is kind of needed to access the rest of the area. Ports are valuable. > If you have to pay hundreds of thousands (or even millions!) to buy a home, are you really going to be okay if it takes a massiv…

> New York is a port. Ports become cities, because access to the rest of the area is kind of needed to access the rest of the area. Ports are valuable.

Sorry, I'm completely lost as to your point here. My point is simply that land is valuable because it is scarce, and its value is the difference in productivity between the given land and the best free land. From that, it follows that if land values are high, there's a massive difference in productivity between high value land and the best free land.

> Other than that, I don't really care. I'm not a real estate investor.

It's great that you don't but your view isn't the majority view. Homeownership is considered as a way to build wealth for the middle class, and this view is pervasive. This is pretty much said all the time, everywhere ("homeownership wealth", "intergenerational wealth", "buying a home is a good investment" etc.), by both politicians and the finance industry, so I'm surprised you don't think this is the case.

I'll give a concrete example though. A member of Parliament responsible for housing policy (Adam Vaughan) was asked if a 10% drop in house prices (after a year of ~30% rises) would be acceptable, and his answer was no, because "We know that Canadians rely on home ownership to secure their place in the economy now, but also as they retire". I doubt his view his uncommon either. He's simply stating what homeowners (who are the majority) think.

Re: Home ownership is the West’s biggest economic-policy mistake

#480

Post by bena »

neilparikh wrote: post #479
bena wrote: post #379

Earlier quoted context omitted.

The problem is that it's not logistically possible. The very thing you want us to ignore for the sake of argument is the crux of the issue. New York is a port. Ports become cities, because access to the rest of the area is kind of needed to access the rest of the area. Ports are valuable. > If you have to pay hundreds of thousands (or even millions!) to buy a home, are you really going to be okay if it takes a massiv…

> New York is a port. Ports become cities, because access to the rest of the area is kind of needed to access the rest of the area. Ports are valuable. Sorry, I'm completely lost as to your point here. My point is simply that land is valuable because it is scarce, and its value is the difference in productivity between the given land and the best free land. From that, it follows that if land values are high, there's…

Ports are valuable, that makes the land that make up the ports valuable. Geography matters. New York would still be valuable because it's in a valuable situation.

Because housing security is also inherently valuable.

Also, what's to make the words of Canadian parliament the truth? Does he not have a vested interest in a certain outcome? Residential home owners aren't looking to "wealth" when they buy a house. They're looking for residence.

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