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What broke Sweden? Real estate bust exposes big divide

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Re: What broke Sweden? Real estate bust exposes big divide

#51

Post by varispeed »

joshuaissac wrote: post #21
varispeed wrote: post #14

Earlier quoted context omitted.

> but for some reason that route is never explored. The reason you are looking for is called corruption. There is a very strong lobby of landlords and the rich treating residential housing as a store of value. It offers better returns than keeping money in the bank and it is safer, especially if you are from a country where your assets could be in danger - it's much harder for foreign states to take control of the pr…

> The reason you are looking for is called corruption. It could just be democracy. Homeowners are an important vote bank and they generally want house prices to rise. A government that substantially increased housing supply would cause house prices to drop, which would make homeowners unhappy.

There is no democracy if most parties have the same policies regarding this and the weaker parties can be easily influenced to drop anything against the status quo.

Re: What broke Sweden? Real estate bust exposes big divide

#52

Post by jjoonathan »

gruez wrote: post #47
jjoonathan wrote: post #43

Earlier quoted context omitted.

> super-PACs or lobbyists Presidents don't make zoning decisions. Next time you attend a zoning meeting, take a good look at the people who are most passionately creating friction (or their power base, if they are outsiders). You will find a bunch of property owners looking after their property values.

>Next time you attend a zoning meeting, take a good look at the people who are most passionately creating friction (or their power base, if they are outsiders). You will find a bunch of property owners looking after their property values. That's... exactly what I was arguing for? In the subsequent sentence: >They're just people showing up to local government meetings in their spare time.

My point is that these people are directly motivated by capitalist incentives.

> spare time

No, not spare. Stopping new construction makes them money, sometimes a lot of money. They are expecting a large, dollar-denominated (or Krona-denominated) return on their investment of time, paid for by future renters and buyers who will not have the additional options they are so diligently trying to torpedo.

Re: What broke Sweden? Real estate bust exposes big divide

#53

Post by brabel »

havblue wrote: post #15
ChuckNorris89 wrote: post #6

Real estate can either be a lucrative investment or it can be affordable. Why are people continuously acting shocked when they realize it can't be both? And why are elected politicians everywhere continuously shrugging their shoulders as if the housing market is somethin completely outside of their control.

It's funny that it was sold as "affordability". Is it really more affordable to have a mortgage that lasts twice as long? Can we really consider interest only to be home ownership? You don't own that home, the banks do, Maverick!

If you invest your money on anything that gives , say, 5% yearly returns on your money, instead of paying off your mortgage, which used to be at less than 2% (but is not getting beyone 4%), you're just better off.

Say you start with a 10,000 mortgage, and your payment per year is 500, not including interest. By the end of the year, you'll have a 9,500 mortgage left. If you just invested the 500 and only paid interest on the mortgage (which was common in Sweden until a few years ago), you'll still have a 10,000 mortgage, but you have 525 in your pocket. You could now go and pay off some mortgage, resulting in you having now only 9,475 left (i.e. you're better off)... but why would you do that? Just keep investing that money!

Re: What broke Sweden? Real estate bust exposes big divide

#55

Post by [deleted] »

bequanna wrote: post #48
rhaway84773 wrote: post #45

The Sweden story sounds so much like the SF story. Area doesn’t building housing, leading to a massive increase in house prices and a destruction of class mobility as the rich get richer (as their houses get more valuable) and the poor get poorer (as they pay more to rent the same living space). The growing wealth inequality leads to all sorts of other dysfunction including increased crime, worsening services, etc. a…

> The growing wealth inequality leads to all sorts of other dysfunction including increased crime, worsening services, etc. as the govt cannot raise enough taxes. Hold up. I don’t think the people of San Francisco grew weary of increasing rents and decided to turn to a life of crime. Most of the “trouble makers” in the Bay Area are recent arrivals to the area and come because of poor policing and the government is ge…

[deleted]

Re: What broke Sweden? Real estate bust exposes big divide

#57

Post by brailsafe »

moltar wrote: post #13
timkam wrote: post #10

A key problem in Sweden -- besides the weird interaction of privatization and legacy over-regulation -- is that the current inflation and rising interest rates break the social contract: a relatively even salary distribution allowed many people to have a solid middle-class life style, recently albeit with never-ending mortgages. Now, the interest rates are too high for these mortgages to be even superficially sustain…

I think you could say exactly the same story about Canada. And imagine many other countries soon. Interest rates will spoil the party.

Canada is fucked

Re: What broke Sweden? Real estate bust exposes big divide

#58

Post by AdrianB1 »

ChuckNorris89 wrote: post #8
nivenkos wrote: post #7

The main problem is the terrible rent control system - with a lucky few getting rent-controlled first-hand contracts, and everyone else facing a cut-throat almost completely unregulated market of sub-letting. Rent control never works.

Of course it doesn't. The only way to bring down prices is to build more supply than the demand, but for some reason this elephant in the room is always ignored because always a million reasons come up against it, mostly being just NIMBYsm in disguise. Keeping a limited supply artificially price capped through regulations, sounds good at first, and will most likely be popular with clueless voters, but it will lead to…

You got the communist part wrong. If you are born in 1989 as your name suggests, I see why you got it wrong, like that entire generation and the generations after that, but it does not makes it right. Food shortage in Romania had a very different cause.

Re: What broke Sweden? Real estate bust exposes big divide

#59

Post by tannhaeuser »

varispeed wrote: post #14
ChuckNorris89 wrote: post #8

Earlier quoted context omitted.

Of course it doesn't. The only way to bring down prices is to build more supply than the demand, but for some reason this elephant in the room is always ignored because always a million reasons come up against it, mostly being just NIMBYsm in disguise. Keeping a limited supply artificially price capped through regulations, sounds good at first, and will most likely be popular with clueless voters, but it will lead to…

> but for some reason that route is never explored. The reason you are looking for is called corruption. There is a very strong lobby of landlords and the rich treating residential housing as a store of value. It offers better returns than keeping money in the bank and it is safer, especially if you are from a country where your assets could be in danger - it's much harder for foreign states to take control of the pr…

The situation in the UK and in Sweden appears to be very different, though. Sweden's rent control was certainly welcomed as pro-tenant policy, except (as noted by GP) has led to a black/secondary market of sub-letting and selling existing rent-controlled contracts at enormous prices, while keeping economical incentives for new construction low. That's really basic economic literacy and even suggested by OECD to the Swedish government. Of course, that doesn't stop eg Berlin leftist parties to suggest rent controls (read: to buy votes).

Re: What broke Sweden? Real estate bust exposes big divide

#60

Post by oblio »

varispeed wrote: post #46
timkam wrote: post #10

A key problem in Sweden -- besides the weird interaction of privatization and legacy over-regulation -- is that the current inflation and rising interest rates break the social contract: a relatively even salary distribution allowed many people to have a solid middle-class life style, recently albeit with never-ending mortgages. Now, the interest rates are too high for these mortgages to be even superficially sustain…

[flagged]

How does this work? We've had a decade of low inflation, low interest rates. Now we have high inflation, high interest rates?

Which one was architected? It can't really be both.

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