How I won the housing market without trying • Hacker News Board

Re: How I won the housing market without trying

#31

Post by nl » Thu, Feb 05, 2015, 10:11 AM UTC

vacri wrote: post #9

A couple of things are worth mentioning. Firstly, everything but housing is much cheaper now than in the 80s/90s. People will spend their money somewhere. The ability to do your own repairs is also much greater, as the huge (and cheap!) hardware stores have sprung up and the DIY culture has become stronger. Secondly, I don't know about the UK, but here in Australia, home loans in the 80s had interest rates of almost…

here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today.

That's a pretty big exaggeration. Rates peaked at 17% in 1989, but were below 15% for most of the 80's[1].

[1] http://www.loansense.com.au/historical-rates.html

Re: How I won the housing market without trying

#32

Post by jgraham » Thu, Feb 05, 2015, 10:13 AM UTC

awjr wrote: post #23

brianmcc wrote: post #19

Earlier quoted context omitted.

In many places in the UK, it did crash big time. Plenty of people I know even today are in homes well below their 2007 levels or have sold for painful losses. London is unusual in that many properties sell for cash, to investors, and in fact the BoE and mortgage lenders have surprisingly little influence in terms of rate changes. Not sure letting anything "burn" particularly helps anybody. Edit: I suspect "let it bur…

My mother just recently bought a studio flat in Wales for 31k. Prices are dropping around the country. London prices are forcing people away from living in London. Businesses are moving away. (If you are a young developer, I'd suggest moving to Bristol.)

The data doesn't seem to support that view [1]. The headline claim there is that average property prices across the country rose by 7% last year, with London more than double that and no area showing an annual fall.

It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense.

[1] https://www.gov.uk/government/uploads/system/uploads/attachm...

Re: How I won the housing market without trying

#33

Post by matthewmacleod » Thu, Feb 05, 2015, 10:13 AM UTC

junto wrote: post #14

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the pr…

I don't think you achieve much by 'letting it burn,' as it were. All you do is force a large number of people into a bad financial situation – that's not good for anybody.

The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.

Re: How I won the housing market without trying

#34

Post by easytiger » Thu, Feb 05, 2015, 10:14 AM UTC

yummyfajitas wrote: post #29

stana wrote: post #22

Thanks to banking deregulation housing has become an investment commodity. In major cities in Australia at the moment half the purchases are for investment rather than owner-occupier. Government incentives like first-home buyer grants (if you can't save for a deposit) have only lifted the prices and helped vendors. Another one is negative-gearing introduced a couple of decades ago allowing tax deduction for investmen…

Why would housing not be an investment commodity if banks were more strongly regulated? What specific regulation do you propose that would prevent housing investments?

Communal ownership of all property comrade!

Re: How I won the housing market without trying

#35

Post by NotableAlamode » Thu, Feb 05, 2015, 10:16 AM UTC

awjr wrote: post #13

NotableAlamode wrote: post #11

Earlier quoted context omitted.

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent. I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt... It's called "buy-to-leave" and no it's not xenophobia, it's a symptom of a housing bubble very much centred on London.

The article is a bit sketchy on the methodology used. The fact that not everybody flat investigated has somebody on the electoral register can easily be explained by several factors.

- The central London population is very transient. Many stay only for a few weeks, months or at most a year or two. Why bother registering?

- Many central Londoners, especially the young and newly arrived, move about quite a lot before they settle in one place for longer. They would not bother with registration.

- Many, probably the majority of central Londoners are foreign and don't bother with the electoral register because they can't vote in the general elections anyway, and may not know that the can vote for the major (or may not care).

- There's a lot of legally questionable subletting going on (think AirBnB), where the subletter and / or sublettee might not necessarily want to be on an official register.

- Some owners may simply fail to find a tenant, for example because they pitch rent too high.

As a piece of anecdotal evidence, I offer myself: I only got on the electoral register about 10 years after I moved to London.

Re: How I won the housing market without trying

#36

Post by matthewmacleod » Thu, Feb 05, 2015, 10:16 AM UTC

NotableAlamode wrote: post #11

awjr wrote: post #4

In the UK it's normal practice to get in a chain. You sell yours, line up the one you want to buy, and all 14 people in the chain complete on the same day. Not sure you should be selling your house, then deciding to look. You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were ab…

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent. I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

The rental income from properties is not worth the hassle. It turns a relatively liquid asset into a much more illiquid one – tenancy rights in the UK are quite strong.

If you want to park your money in property, the worst thing you could do is hand control of that money to a group of people with legal right to keep if for certain periods.

Re: How I won the housing market without trying

#37

Post by AmirS2 » Thu, Feb 05, 2015, 10:20 AM UTC

NotableAlamode wrote: post #21

suvelx wrote: post #12

Earlier quoted context omitted.

Use diminishes value. Having tenants requires work, adds cost, and might just not be worth your time. You might just want a house for a weekend, and not want plebs messing your shit up. And it probably has some degree of truth, You can stand outside 'new' buildings for a week and never see lights on in some windows.

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

These buy-to-leave flats are generally newly built (and were bought off plan), in high rise buildings with concierge / security, so there are no worries about heating, burglary or squatting...

I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.

Re: How I won the housing market without trying

#38

Post by tonylemesmer » Thu, Feb 05, 2015, 10:20 AM UTC

nl wrote: post #31

vacri wrote: post #9

A couple of things are worth mentioning. Firstly, everything but housing is much cheaper now than in the 80s/90s. People will spend their money somewhere. The ability to do your own repairs is also much greater, as the huge (and cheap!) hardware stores have sprung up and the DIY culture has become stronger. Secondly, I don't know about the UK, but here in Australia, home loans in the 80s had interest rates of almost…

here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. That's a pretty big exaggeration. Rates peaked at 17% in 1989, but were below 15% for most of the 80's[1]. [1] http://www.loansense.com.au/historical-rates.html

Individual loan products from lenders would have been slightly different to rate shown in the graph. So "almost 20%" isn't that far off.

Re: How I won the housing market without trying

#39

Post by justincormack » Thu, Feb 05, 2015, 10:21 AM UTC

matthewmacleod wrote: post #33

junto wrote: post #14

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the pr…

I don't think you achieve much by 'letting it burn,' as it were. All you do is force a large number of people into a bad financial situation – that's not good for anybody. The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.

Property is a zero sum game. People without houses lose the equivalent in future spending as homeowners gain. So propping up a market is directly taking money from the young and increasingly old non homeowners. So not doing anything is putting a large number of people in a bad situation.

Re: How I won the housing market without trying

#40

Post by NotableAlamode » Thu, Feb 05, 2015, 10:22 AM UTC

matthewmacleod wrote: post #36

NotableAlamode wrote: post #11

Earlier quoted context omitted.

I seriously doubt that 40% figure. Why would "foreign buyers" who by flats as investments not take home the (very substantial) London rents? It would be financially imprudent. I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.

The rental income from properties is not worth the hassle. It turns a relatively liquid asset into a much more illiquid one – tenancy rights in the UK are quite strong. If you want to park your money in property, the worst thing you could do is hand control of that money to a group of people with legal right to keep if for certain periods.

I agree on liquidity, but housing, occupied or not, is quite illiquid anyway. If you care about liquidity, you'd rather invest in other asset classes.

Property prices and rental income in London are extremely high. I cannot see how anyone but the extremely wealthy could afford letting London property stay empty as an investment. And there are not enough extremely wealthy around to account for the large number of empty properties that London is allegedly seeing.