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

Re: How I won the housing market without trying

#51

Post by pjc50 » Thu, Feb 05, 2015, 10:37 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?

He mentioned a list of items, such as

Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties)

which is apparently a rule that's not being enforced. Lots of the western world is seeing housing bid upwards by capital flight from China.

Re: How I won the housing market without trying

#52

Post by Omniusaspirer » Thu, Feb 05, 2015, 10:38 AM UTC

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…

It's basically inevitable though that in demand property will rise in price, especially with regulation constraining building height/form factor. Home cost in urban areas is much more about location than it's about any real cost to building the residence. Lots of people buy large houses for very little a few miles out of town where land is abundant and demand is more reasonable.

I guess I'm just having trouble really feeling sorry for anyone who decides that living within a select few square miles is worth paying an obscene percentage of their income towards that pursuit. It's a housing market and prices will rise to meet demand until buyers finally split off to other nearby locales.

As to your last line; There's a reason that most people don't want to admit that 2008 was the housing bubble popping and instead insist that homes are "finally returning to their true value".

Re: How I won the housing market without trying

#53

Post by pjc50 » Thu, Feb 05, 2015, 10:39 AM UTC

justincormack wrote: post #39

matthewmacleod wrote: post #33

Earlier quoted context omitted.

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.

Zero sum, unless more houses are built...

Re: How I won the housing market without trying

#54

Post by yummyfajitas » Thu, Feb 05, 2015, 10:41 AM UTC

pjc50 wrote: post #51

yummyfajitas wrote: post #29

Earlier quoted context omitted.

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?

He mentioned a list of items, such as Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties) which is apparently a rule that's not being enforced. Lots of the western world is seeing housing bid upwards by capital flight from China.

It's not a banking regulation.

Re: How I won the housing market without trying

#55

Post by stana » Thu, Feb 05, 2015, 10:41 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?

Not prevent it. But around half the purchases in housing being for investment seems a bit distorted. As far as regulation I would start by encouraging lending to productive parts of the economy (business, innovation, startup, infrastructure, etc.) and limit lending for rent-seeking activities like market speculation.

Re: How I won the housing market without trying

#56

Post by pjc50 » Thu, Feb 05, 2015, 10:42 AM UTC

barrkel wrote: post #45

awjr wrote: post #23

Earlier quoted context omitted.

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.)

You'll severely limit your career and earning potential if you do that, particularly if you're not a founder or otherwise in a position to insulate yourself from pure market salaries. Dev salaries are not high in Britain as a whole, outside of London.

Depends on whether you measure earning potential in pounds or houses. Someone earning £50k in an area of £250k houses is being paid 0.2 houses per annum. If they can get £40k in an area of £100k houses their spending power has gone up not down.

If only it weren't so necessary to be physically present for the work.

Re: How I won the housing market without trying

#57

Post by yummyfajitas » Thu, Feb 05, 2015, 10:42 AM UTC

jussij wrote: post #49

yummyfajitas wrote: post #29

Earlier quoted context omitted.

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?

In Australia we have negative gearing . In layman's terms it means you can offset property expenses against your real income. So if you have a big income with a corresponding big tax burden, you can reduce you extra income to purchase a property and by using the expenses of that investment, reduce you net income and hence reduce you net tax burden. So rather than paying the tax man, you end up paying the bank, which…

Negative gearing is not a banking regulation, it's a tax subsidy.

Re: How I won the housing market without trying

#58

Post by lars512 » Thu, Feb 05, 2015, 10:45 AM UTC

Omniusaspirer wrote: post #52

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…

It's basically inevitable though that in demand property will rise in price, especially with regulation constraining building height/form factor. Home cost in urban areas is much more about location than it's about any real cost to building the residence. Lots of people buy large houses for very little a few miles out of town where land is abundant and demand is more reasonable. I guess I'm just having trouble really…

Well, picking a shorter commute is a reasonable choice to make. Longer commutes don't take time from work, they take time from family, and are associated with higher divorce rates, at least amongst Swedes.

In a city like Melbourne, where I live, there's a lot of development which could still be done to reach a reasonable medium-density of 3-4 story apartment buildings in the suburbs immediately circling the CBD. It is being done, but not to such an extent that housing prices will stop rising. I really wonder what this city will look like in another 20 years, as people are pushed further and further out but the work is still centralised.

Re: How I won the housing market without trying

#59

Post by brianmcc » Thu, Feb 05, 2015, 10:45 AM UTC

barrkel wrote: post #45

awjr wrote: post #23

Earlier quoted context omitted.

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.)

You'll severely limit your career and earning potential if you do that, particularly if you're not a founder or otherwise in a position to insulate yourself from pure market salaries. Dev salaries are not high in Britain as a whole, outside of London.

There are pockets outside London where demand for developers is very high. Don't be fooled into thinking it's London or nothing for the UK workforce. I'm in Central Scotland, and there's a thriving tech thing going on here.

Re: How I won the housing market without trying

#60

Post by notahacker » Thu, Feb 05, 2015, 10:46 AM UTC

justincormack wrote: post #39

matthewmacleod wrote: post #33

Earlier quoted context omitted.

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.

Property isn't quite a zero sum game; as the last few years have show the overall losses from a crash outweigh the benefits of lower prices and greater liquidity to people without houses (especially if the result is that people without houses can't get mortgages even after the prices have fallen)

That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.