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How I won the housing market without trying

theguardian.com

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Re: How I won the housing market without trying

#91

Post by ArkyBeagle »

duckingtest wrote: post #81

Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net…

I suspect that "productive use" of capital has simply worn away. What's left is buy and hold of property.

Henry George is credited with land rents taxation as a theory. He built on Ricardo's work to posit a complete theory of taxation based purely on land rents.

Re: How I won the housing market without trying

#92

Post by notahacker »

lentil_soup wrote: post #70
notahacker wrote: post #60

Earlier quoted context omitted.

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…

Doesn't "losses from a crash outweigh the benefits of lower prices" depend on who you're talking about?. For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are…

People most vulnerable to house price changes are people who own the title deeds to a house and an obligation to make mortgage repayments which may end up vastly exceeding the future value of the house. And the banks which see rising default rates from owners in negative equity, repossessed houses they can't sell. And anyone whose pension fund bought the wrong tranche of CDOs. Not to mention property developers, and workers in construction industries that support it, assuming the house price fall is generalised.

People least likely to be positively affected by a house price crash include people that don't have houses, the majority of whom face considerably more difficulty and up-front expense in obtaining a mortgage in an environment of falling or unstable property prices.

Sure, there are some beneficiaries from a house price crash, just like some people make money shorting a failing company. That doesn't mean there isn't a deadweight loss, and if your conception of people who are "most vulnerable" to property prices prioritizes the welfare of those with no significant exposure to property but plenty of liquid funds and a long term investment horizon, it's a very strange conception.

Much of the world is still suffering from the after-effects of a major house price crash in the US several years later; I'm genuinely quite saddened that some people are so adamant the effects of that must have been "zero sum" they feel obliged to reach for the downvote button when HN commenters have the temerity to suggest otherwise.

Re: How I won the housing market without trying

#93

Post by dingaling »

> A person holding a land in the city for 25 years didn't make anything new

Of course they did. When they took out their mortgage, none of that 'money' existed. They had to participate in the creation of wealth in order to pay back mortgage + interest.

I've finally paid-off my mortgage. If someone has a more 'productive' use for my land and building, they are welcome to make me a financial offer.

Re: How I won the housing market without trying

#94

Post by barrkel »

porker wrote: post #74
barrkel wrote: post #69

Earlier quoted context omitted.

I tend to measure things in disposable income: how much money I have left over after paying the big bills. And this is a fairly absolute measure, rather than relative to living costs, as I spend much of my disposable income on stuff that costs similar amounts no matter where I live. 50k is a mediocre salary, mind.

Mediocre salary???? Either you live in the square mile bubble, or you're not British. £50k is what a senior software developer outside London gets.

That's exactly my point: UK software salaries are not high outside of London, and that if you want a good salary, you need to work in London.

Re: How I won the housing market without trying

#95

Post by barrkel »

pjc50 wrote: post #71
barrkel wrote: post #69

Earlier quoted context omitted.

I tend to measure things in disposable income: how much money I have left over after paying the big bills. And this is a fairly absolute measure, rather than relative to living costs, as I spend much of my disposable income on stuff that costs similar amounts no matter where I live. 50k is a mediocre salary, mind.

50k is a 90th percentile salary for the UK as a whole and competitive for non-London non-senior management software dev jobs.

Perhaps the context of this thread has been lost. It started out with me asserting that you get poor return outside of London.

Personally, I think there's little point in living in the UK outside of London. There's far nicer places to live if you're willing to take a hit in salary. (And no, I'm not British.)

Re: How I won the housing market without trying

#96

Post by collyw »

ptaipale wrote: post #88
collyw wrote: post #84

Earlier quoted context omitted.

Its basically transferring wealth for those who don't own to those who do. My parents house has quadruple in price over the last 20 years, (while wages have gone up maybe 50%). Where does that money come from? The younger generation that have to buy it from them when they sell up of course.

> Where does that money come from? I think the question is more about where does that demand come from, as it clearly increases faster than supply. Where does that demand come from? Population growth, particularly immigration, as well as migration of people within nations.

Credit growth as well.

Re: How I won the housing market without trying

#97

Post by lucaspiller »

brianmcc wrote: post #59
barrkel wrote: post #45

Earlier quoted context omitted.

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.

In my experience jobs outside of London have a much lower earning potential. I went to university in Devon, and there are a fair few tech jobs around there, but even as a senior developer with 10 years experience I wouldn't get much more than £40k. Instead I moved to London, and was getting more than that two years after I graduated.

Sure London is more expensive, but if you don't mind commuting you can live further out of the city for not much more than the UK average - I'd imagine rents between Bristol and Reading are pretty similar, but Reading is easily commutable to London (Bristol isn't bad either, but I wouldn't like to do it every day).

There is also the question of technologies too, if you aren't happy working with legacy Java or .NET systems then you'll have a much harder time getting a job outside of London.

Also where exactly is Central Scotland (I'm a southerner)?

Re: How I won the housing market without trying

#98

Post by nl »

jussij wrote: post #87
nl wrote: post #77

Earlier quoted context omitted.

I suspect the parent was replying to the second part of your question: What specific regulation do you propose that would prevent housing investments? . The parent's response is (presumably): "remove negative gearing".

That is correct. The original parent said "housing has become an investment commodity" and that it very true here in Oz. Thanks to a climate of very low interest rates and "negative gearing" it means only those with high taxable income and a high tax burden can afford to invest in housing and in the process pushing housing prices ever higher. But this is a bubble and it is unsustainable. If the world economy ever get…

(I'm Australian)

But this is a bubble and it is unsustainable.

So many people say this, presumably because "it must be true".

I just don't see why that is necessarily so - at least in the medium (20-30 years) term. Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.

In the short term, yeah, it would be good to see lower growth in housing prices, or even a drop. I'm quite sympathetic to the idea of negative gearing reform.

A 5% drop in real terms is possible, or even likely at some point, and markets like Perth and Darwin will always be more volatile.

But that's very different to the 30-50% drops that "bubble bursting" implies.

Re: How I won the housing market without trying

#99

Post by nl »

collyw wrote: post #84
nl wrote: post #72

Earlier quoted context omitted.

I think blaming banking deregulation for making housing an investment is a pretty difficult case to make. Negative gearing, and the flight to safety by overseas investor do have significant impact though. I suspect many people who think that governments should act to try to cut prices miss the fact how hugely unpopular this would be with the majority of the population. Many (most?) people have the majority of their s…

Its basically transferring wealth for those who don't own to those who do. My parents house has quadruple in price over the last 20 years, (while wages have gone up maybe 50%). Where does that money come from? The younger generation that have to buy it from them when they sell up of course.

Its basically transferring wealth for those who don't own to those who do.

What is? Banking deregulation? Or the features of the tax system like negative gearing?

They are very different things, and talking about them both as they are the same thing or have the same effect is just plain wrong.

Re: How I won the housing market without trying

#100

Post by nl »

tonylemesmer wrote: post #38
nl wrote: post #31

Earlier quoted context omitted.

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.

I'm old enough to remember rates in the 80's (though not old enough to have had one!). And I have a loan now, and the rates almost exactly match the rates in that table.

Here's another reference: http://www.abc.net.au/news/2007-08-08/the-reality-of-interes...

17% was as high as they got for mortgages.

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