4 ms·

I think increasing supply is a good idea in the short run, but in the long run, I think the answer lies more in changing the way society views real estate. As

I think increasing supply is a good idea in the short run, but in the long run, I think the answer lies more in changing the way society views real estate. As the article makes clear, real estate is increasingly viewed as an asset that can simply be purchased and held on to diversify a risky portfolio. Foreign property owners add little to no value (in a true, human, social sense) to the greater society. They do contribute tax revenue, but at the expense of making real estate unattainable for others by driving up prices. Real estate used to be the center of a business owner's livelihood or a family's multi-decade investment in an area with family, good schools, a good community, etc. While increasing supply would reduce price, foreign investors would simply purchase more. Demand for (perceived) stable assets to offset market volatility is at an all time high, especially in China where many are trying to export wealth. When the market crashes, you'll have an oversupply of property that was built for people who did not actually inhabit the area.

eru 11y ago
See http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val...
- roymurdock 11y ago
  LVT is thrown around a lot, but rarely understood by its proponents. Can you explain who would value the land and by what method it would be valued in order to guarantee fair payments from all parties? Would it completely replace the current property tax?
  - eru 11y ago
    http://kaalvtn.blogspot.com.au/ http://kaalvtn.blogspot.com.au/ has worked out some good answers for the UK. > Would it completely replace the current property tax? Of which country? There are lots of ways to implement LVT in different countries and different states (and it could even be implemented at even more local levels). I have a softspot for methods that ask the owner themselves to value the land, but apply mechanism to keep them honest. (Like, `you have to sell at the declared value to any comer.') But honestly, those are probably not even the most practical ones.
andrewjl 11y ago
Given the current supply constraints in that market, it will take a very long time to build up a level of inventory that will cause a crash. The solution to the problem you're describing is more units, not less. Also, this transition in real estate's role is a result of globalization. Without some kind of capital controls it's very hard to undo it's effects. Your best bet is a supply-demand oriented solution.
- roymurdock 11y ago
  When I talk about a crash, I mean a global correction in property and equity market values akin to the correction post-financial crisis. This would probably be triggered by a withdrawal of liquidity from public markets due to non-performing debt, or simply a prevailing market sentiment that investments have been channeled into the wrong assets following the great recession - not enough gov investment into TFP-raising infrastructure and decreasing lack of aggregate demand is a recipe for stagnation. I don't see a mechanism whereby an increasing level of inventory causes a crash. I'm saying that when a crash happens, we'll be left with wasted excess capacity as investors rush to sell off ill-thought out high rise complexes, micro apartment buildings, second and third homes they can no longer afford to pay taxes on, etc.
  - andrewjl 11y ago
    The North American correction in property values post the 2008 financial crisis was due to two factors: 1) Increase in inventory levels as subprime borrowers tried to exit their mortgage via a fire sale 2) Total shut down of the mortgage markets, meaning only cash buyers could get deals done. Given the profile of the typical buyer at the high end of the market in Vancouver, an outsized effect like the one described above is unlikely. These homes are not mortgaged and their owners have savings they draw upon instead of income from employment. Job losses a la 2008 do not affect them as much. For these reasons I doubt we will ever see the kind of corrections in Vancouver like we saw in places like Phoenix and Las Vegas in 2008. Finally, a somewhat normative question, what's wrong with cheap housing? I agree with you that ill-thought out planning is detrimental to the city's quality of life. But to me at least it seems that the planning and permitting process is overly restrictive.

eru 11y ago

See http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val...

roymurdock 11y ago
LVT is thrown around a lot, but rarely understood by its proponents. Can you explain who would value the land and by what method it would be valued in order to guarantee fair payments from all parties? Would it completely replace the current property tax?
- eru 11y ago
  http://kaalvtn.blogspot.com.au/ http://kaalvtn.blogspot.com.au/ has worked out some good answers for the UK. > Would it completely replace the current property tax? Of which country? There are lots of ways to implement LVT in different countries and different states (and it could even be implemented at even more local levels). I have a softspot for methods that ask the owner themselves to value the land, but apply mechanism to keep them honest. (Like, `you have to sell at the declared value to any comer.') But honestly, those are probably not even the most practical ones.

andrewjl 11y ago

Given the current supply constraints in that market, it will take a very long time to build up a level of inventory that will cause a crash. The solution to the problem you're describing is more units, not less. Also, this transition in real estate's role is a result of globalization. Without some kind of capital controls it's very hard to undo it's effects. Your best bet is a supply-demand oriented solution.

roymurdock 11y ago
When I talk about a crash, I mean a global correction in property and equity market values akin to the correction post-financial crisis. This would probably be triggered by a withdrawal of liquidity from public markets due to non-performing debt, or simply a prevailing market sentiment that investments have been channeled into the wrong assets following the great recession - not enough gov investment into TFP-raising infrastructure and decreasing lack of aggregate demand is a recipe for stagnation. I don't see a mechanism whereby an increasing level of inventory causes a crash. I'm saying that when a crash happens, we'll be left with wasted excess capacity as investors rush to sell off ill-thought out high rise complexes, micro apartment buildings, second and third homes they can no longer afford to pay taxes on, etc.
- andrewjl 11y ago
  The North American correction in property values post the 2008 financial crisis was due to two factors: 1) Increase in inventory levels as subprime borrowers tried to exit their mortgage via a fire sale 2) Total shut down of the mortgage markets, meaning only cash buyers could get deals done. Given the profile of the typical buyer at the high end of the market in Vancouver, an outsized effect like the one described above is unlikely. These homes are not mortgaged and their owners have savings they draw upon instead of income from employment. Job losses a la 2008 do not affect them as much. For these reasons I doubt we will ever see the kind of corrections in Vancouver like we saw in places like Phoenix and Las Vegas in 2008. Finally, a somewhat normative question, what's wrong with cheap housing? I agree with you that ill-thought out planning is detrimental to the city's quality of life. But to me at least it seems that the planning and permitting process is overly restrictive.