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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

#111
post #102
post #95

Earlier quoted context omitted.

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.)

What places would you suggest? My argument was a PPP and quality-of-life one, really. Moving to Edinburgh has worked out quite nicely in that regard.

Somewhere with better weather and better connections to the rest of the world.

I spend most of my money on travel, motorcycles, food and fine wine (in particular, aged fortified wines in the 3-digit price range). Food is the only one particularly affected by PPP. A typical meal out for two costs £60 to £200, depending quality and wine bought. I'll spend more on a special occasion. But living outside London, I'd have a harder time finding great places to eat. My experience from touring the UK is that there are more hearty, good value options especially as you go north, but fine dining gets scarcer.

Travel is really important to me, touring by motorcycle specifically. But the south of England is very flat, and the fastest way to the continent is a train to France. Once you land in France, you have to cross it to get to wherever you're going. Alternately, one can take a ferry and suffer excruciating boredom only marginally worse than a motorway.

Almost anywhere in central Europe would be better for biking - southeast France, northern Italy, southern Germany, Austria - or northern Spain, if I didn't want to leave the country for some of the best roads in the world. More snow in winter, mind, but I could live with that. Certainly, the roads in the UK are among the worst in western Europe, outside of Belgium and possibly Ireland - though Ireland has had a lot of investment, they've built some very odd roads.

I grew up on the west coast of Ireland. My willingness to tolerate rainy days is no longer very high.

Re: How I won the housing market without trying

#112
post #109
post #100

Earlier quoted context omitted.

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.

Well, I guess my argument is completely blown out of the water because they peaked at 17% (I guess 17 is not near 20...) instead of 18-19%, and averaged around a couple of percentage points lower. Hardly a "pretty big exaggeration". It doesn't change the fact that mortgages, regardless of the percentage rate , were still not 'easy' back then. The smaller mortgages were not being paid off with today's rates and today'…

Yes, but in the period you state, when the average wage has risen by 50%, the average house price has risen by over 200%, and RPI has risen by 117%.

It's true that back then, the average monthly mortgage payment might have been similar, if not slightly more (adjusted for inflation). However, a lifetime fixed rate is unusual and they would have moved to lower rates when they came available.

Also back then, more people had a 'job for life', defined benefit pensions, and inflation-matching or beating pay rises without the risk of moving to a new company. One could be reasonably confident that if a mortgage was affordable now, it would continue to be so in the future. Nowadays, with stagnant wages, interest rates that can only go up, and the need to invest more into personal pension funds in order to mitigate the risk of retiring at a market low point.

Re: How I won the housing market without trying

#113
post #98
post #87

Earlier quoted context omitted.

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 i…

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

Consider this link:

http://www.smh.com.au/business/property/median-asking-price-...

* Across Australian state and territory capitals, the median asking price for detached homes jumped $6,400 over the week to $755,100, the figures show.*

At a rate of 6% the interested alone on that loan is $45,000.00 a year. Move that rate to 7% and that jumps to close to $53,000.00 a year.

How can any family earning average or better than average wages every have enough income to cover those interest re-payments?

> Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.

I don't disagree with this and I have no doubt the prices are being over inflated by a large numbers of oversees investors.

Hover, part of that problem is the Australian government is not enforcing it's own rules regarding home ownership. If a foreign money buys a home in Australia the owner needs to be a student or a permanent resident.

Currently there is massive level of overseas investment in Australian driving up the prices in the housing sector but most of that investment is actually illegal:

http://news.domain.com.au/domain/real-estate-news/parliament...

Australia also suffers from demography issues in that there are so few cities where you can live.

Unlike the US where there are numerous big cities options, in Australia there are less than a dozen such big city locations to choose from.

That factor alone is also putting upward pressure on housing in those areas.

The question is will interest rate every go up. That is not certain since the world is still suffering with the issues of the last GFC.

But in Australia if those interest rates do ever start to move upward, which would be an indication the country is finally showing something in the form of economic growth, those rising interest rates are going to cause problems with those massive $1 Million+ home owner debts.

Re: How I won the housing market without trying

#114

Earlier quoted context omitted.

>the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually. Even if they were land taxes, they would be way too s…

> These are property taxes, not land taxes, unless the article is lumping them. I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both. > Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most How would this be sustainable for farmers or ranc…

>I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both.

Land tax is a tax on a value of unimproved land only [0]

>How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?

Why would it change anything? The land prices would just fall so that the net result would be neutral for average farmer.

>He provided liquidity to the market when somebody was willing to sell that piece of land

Land tax increases liquidity drastically by making it much more expensive to hoard it.

>and then you're back to square one - low tax revenues collected from land owners.

It's not back to square one - it's a situation in which people with more productive use of land can get it much more cheaply. Think of a situation in which a prime residential city land costs one average annual wage.

>People do invest in gold and silver.

People do many weird things. https://images.angelpub.com/2014/17/24245/returns-on-stocks-...

[0] http://en.wikipedia.org/wiki/Land_value_tax

Re: How I won the housing market without trying

#115
post #46

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.

> 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. Would they be? What's a realistic amount of rent to charge on a GBP 5,000,000 flat? How many people can afford that and are looking to rent? (Also I think many appreciate having their London flat available for the few days a year they're in t…

I don't know about rent for such luxirious flats. There are so few of them that they cannot account for the 40% empty rate that has been claimed. Almost all new housing in London are small 1 and 2 bedroom flats that cost under £1,000,000.

Re: How I won the housing market without trying

#116
post #99
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.

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.

Pumping up house prices as high as possible, and not allowing free markets to exist - by lowering interest rates as soon as a crash should have happened. Banking deregulation contributes by allowing people to take out loans they can't afford, then the tax payers have to bail them out when they go titsup.
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