9 ms·

> "I'm sure the fact that there's an increasing trend of empty Chinese investment properties isn't helping." This. This. This. A couple of years ago, I found

> "I'm sure the fact that there's an increasing trend of empty Chinese investment properties isn't helping." This. This. This. A couple of years ago, I found myself utterly shocked by the price of homes in San Francisco. In a fit of frustration, I fired off a few emails a few random real estate firms in SF, asking one simple question: "Who the BLEEP can afford these homes?" You see, I was frustrated. I have a great job, great pay, and yet I can't even come close to buying a home in the city I live in. The responses I got were jaw dropping, if not infuriating. The #1 purchaser at 2 of the 3 firms I emailed, were foreign investments. Unused, speculative, investments. I am shocked that land isn't more protected in this state. It seems strange to me, that someone living thousands of miles away, can buy a piece of land with a home on it, thereby shrinking the available market, and driving up the price of housing. This means people who live in, work in, and contribute to, their local community, can't even afford to buy a home there. The fact that this isn't seen as a full on crisis, confuses and saddens me.

davidw 11y ago
What would make it a less interesting investment is if there were a credible threat to add enough supply to devalue it. That's generally how markets keep prices regulated: if they go up enough, more people jump in to producing the good. That mechanism is severely broken in the Bay Area, among other popular places in the US.
- ericd 11y ago
  Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly.
  - muzz 11y ago
    Given that the supply of land cannot be increased (the huge omission in GP's argument), repealing Prop 13 is indeed a large part of the solution.
    - davidw 11y ago
      Thanks to technology, the supply of land is not really the constraint on housing supply in most of San Francisco, and especially not in most of the Bay Area.
      - muzz 11y ago
        What technology are you referring to?
        davidw 11y ago
        At the extreme, these things can hold a lot of people without too much land: https://en.wikipedia.org/wiki/Skyscraper https://en.wikipedia.org/wiki/Skyscraper But you don't really need those in most places. Simply building 'in' more and up 2/3/4 stories would add a ton of housing in much of the bay area.
        muzz 11y ago
        Those are very expensive to build, approaching $1000/sqft. Also require utilities, transit, and other city services (schools, police, fire, etc).
        davidw 11y ago
        Prices are high enough in San Francisco to pay for them. 2/3/4/5/6 stories are significantly cheaper to build.
        Touche 11y ago
        There isn't a cheap way out of SF's situation. > Also require utilities, transit, and other city services (schools, police, fire, etc). High rises don't require those things. People require those things.
        dragonwriter 11y ago
  - _delirium 11y ago
    Taxing vacant real estate is another tool used in some countries and cities. One way of doing it is via an imputed rental income: if a property is not owner-occupied, then the owners are deemed to be earning a rental income (either market rate, or if rent-controlled, then whatever the set rate is), regardless of whether they actually bother to rent it out or not. That increases the cost of sitting on empty housing. (Though the real motivation for an imputed-rental-income law is usually to combat tax fraud: people who're renting out apartments under the table and not reporting the income. It just has the secondary effect of making it more expensive to sit on vacant real estate.)
    - davidw 11y ago
      Yeah, something like that might work too, although it can be kind of invasive in the sense that now you need to check if people are living in a place. In Italy, that meant that the police send someone around for a look inside the house where you say you recently moved to. In theory, at least - they don't always.
      - _delirium 11y ago
        I guess it's easier in countries with some kind of address register. Denmark doesn't police it with physical police, just through the address register: you have an official principle residence, and can only list one. So by definition any other property you own is not owner-occupied. (At least in the cities, I think second homes outside the cities are handled differently.) You can get away with some cheating there, e.g. a couple who live together can claim to be living separately and rent the second one out under the table, or someone who lives with their parents can be dabbling in under-the-table real estate with an investment property they don't really live in. But it at least keeps it to that kind of small-scale thing; the couple can pretend to owner-occupy two properties when they really live in one, but they can't do it with five.
  - AdrianB1 11y ago
    Higher taxes is not enough. Taxing property means you confiscate it piece by piece, the owner will have to pay or lose it, but given enough time the owner will pay more than the value of the property. Why go that slow and not go for it, confiscate all properties and be happy with it? You can always follow examples from the likes of North Korea. Just in case you don't get it: you can ask for taxes when you provide services, not when you vote to raise taxes. Not sure what are more expensive services the empty Chinese-owned houses require to tax for it. And blaming Chinese investment is just a straw man: if all the houses would be occupied by pure-breed white Caucasian Americans (that's a joke) who would you blame, Martians?
    - CPLX 11y ago
      Just wanted to compliment you on one of the most impressive substance-free arm-flailing retorts I have seen in recent memory. It takes skill to weave residents of both North Korea and the planet Mars into a discussion of Bay Area quality of life.
  - dragonwriter 11y ago
    > Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly. More significantly, they would mean that the increased demand for property driving prices would also result in increased public resources to deal with the issues produced.
- pyrophane 11y ago
  Or we could tax foreign investment properties at a higher rate. "Remove barriers and let the market work" isn't the only solution to any given problem.
  - davidw 11y ago
    I'm definitely not a "markets fix all the world's problems" kind of guy. Far from it. But in this case I think it's a big part of the answer, and I'm not alone in that thinking either. This book was particularly good, although a bit high level: http://amzn.to/1rOgoq3 http://amzn.to/1rOgoq3 - and it's also noteworthy because the author, like myself, is somewhat left of center in terms of US politics.
- _delirium 11y ago
  That depends on a lot of factors. Manhattan is an example of a building boom not necessarily increasing supply or lowering prices: a lot of the building boom involved demolition of older, cheaper apartment buildings that were subdivided into small units, to be replaced with newer, higher-end apartment units subdivided into larger units. Net square footage increased, but square footage isn't identical to number of housing units. Which is why over the past 100 years Manhattan has gone from having cheap housing and 2.3 million people, to having expensive housing and 1.6 million people.
  - davidw 11y ago
    Article about Manhattan rental prices dropping: http://ny.curbed.com/2016/4/7/11381852/manhattan-market-reports-rental-prices-drop http://ny.curbed.com/2016/4/7/11381852/manhattan-market-repo...
hkmurakami 11y ago
We made a pact with the devil when as a society we decided to believe that our primary homes would also double as investment vehicles that will appreciate in value and help us fund our retirement.
- hnal943 11y ago
  Except no one decided that - it falls naturally out of the facts that homes are expensive (and therefore represent a large chunk of the wealth of most people) and that homes do not depreciate very much as a result of people living in them.
  - hkmurakami 11y ago
    > homes do not depreciate very much as a result of people living in them. I get what you are saying, but this part above isn't a "natural order of things". For example, homes in Japan are expensive (perhaps representing an even larger fraction of lifetime earnings than in the Statse) yet they depreciate like they are cars.
    - jff 11y ago
      They depreciate like they are cars because Japan focuses on the new. You don't buy a house, you buy the land, knock down the existing house, and build a new one. You don't buy a used car, you buy a new one unless you're broke. There's precious little used market for anything, which can be a boon to those of us who want to buy nice used film cameras from Japanese ebay sellers.
      - hkmurakami 11y ago
        except used video games and used books :) By the way Yahoo Auctions is much more popular than eBay in Japan so you might check that out.
    - jerf 11y ago
      Honest question: Why? My home is about 30 years old and honestly the only way you'd know that is by recognizing certain features and techniques that pin it to that general time period of construction and code requirements. It's not like everything shows "30 years of wear" on it. (Of course all the surfaces have been replaced at least once over time, but by mass of the house that's not that much; maintenance is maintenance.) So it seems sensible to me that it hasn't depreciated all that much, in the way that, say, a computer from the same time period is basically worth whichever is greater of "nostalgia" and "scrap metal" value.
ubernostrum 11y ago
Unused, speculative, investments. As I understand it, it's not really speculative, but rather is a way around China's currency controls. It's allegedly quite difficult, if you're Chinese, to convert holdings into USD or other currencies and get that money out of the country, and investing in foreign real estate is apparently a popular way to work around that
ASinclair 11y ago
The final slap in the face is that the investment is guarded from rising property taxes by Prop 13.
bubbleRefuge 11y ago
Same thing happening in South Florida only buyers are South American oligarchs/crooks. A good fix would be to charge much higher property tax rates for non-owner occupied single family residences.
marincounty 11y ago
I was floored when I heard it just takes a phone call in order to buy property in the United States. I would kinda understand if we were allowed the same reciprocity, but from what I gather; it's very difficult to buy property in most foreign countries. I can't even debate it too much, before someone call me a racist.
shenanigoat 11y ago
Absolutely. The same thing is happening here in Vancouver and it is eventually going to suck the life out of the city. Beautiful homes in formerly vibrant neighbourhoods are left empty...indefinitely...held as an investment by offshore owners. The governments (provincial, civil, and federal) have no intention of limiting foreign ownership so it will continue apace until nobody wants (or can afford) to live here. I rent a house that was bought in 2014 (when I moved in) for $800k and it's now worth $1.5M. Foreign investment is driving this.
- rubicon33 11y ago
  Ah! I was hoping someone from Vancouver might comment, as I have heard through the grapevine that there is HUGE foreign money (mainly from China) buying up land there, and driving prices sky high. Hadn't heard much else than rumor about it though. Hopefully Vancouver will figure something out, I hear it's a very nice place to live.

davidw 11y ago

What would make it a less interesting investment is if there were a credible threat to add enough supply to devalue it. That's generally how markets keep prices regulated: if they go up enough, more people jump in to producing the good. That mechanism is severely broken in the Bay Area, among other popular places in the US.

ericd 11y ago
Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly.
- muzz 11y ago
  Given that the supply of land cannot be increased (the huge omission in GP's argument), repealing Prop 13 is indeed a large part of the solution.
  - davidw 11y ago
    Thanks to technology, the supply of land is not really the constraint on housing supply in most of San Francisco, and especially not in most of the Bay Area.
    - muzz 11y ago
      What technology are you referring to?
      - davidw 11y ago
        At the extreme, these things can hold a lot of people without too much land: https://en.wikipedia.org/wiki/Skyscraper https://en.wikipedia.org/wiki/Skyscraper But you don't really need those in most places. Simply building 'in' more and up 2/3/4 stories would add a ton of housing in much of the bay area.
        muzz 11y ago
        Those are very expensive to build, approaching $1000/sqft. Also require utilities, transit, and other city services (schools, police, fire, etc).
        davidw 11y ago
        Prices are high enough in San Francisco to pay for them. 2/3/4/5/6 stories are significantly cheaper to build.
        Touche 11y ago
        There isn't a cheap way out of SF's situation. > Also require utilities, transit, and other city services (schools, police, fire, etc). High rises don't require those things. People require those things.
        dragonwriter 11y ago
- _delirium 11y ago
  Taxing vacant real estate is another tool used in some countries and cities. One way of doing it is via an imputed rental income: if a property is not owner-occupied, then the owners are deemed to be earning a rental income (either market rate, or if rent-controlled, then whatever the set rate is), regardless of whether they actually bother to rent it out or not. That increases the cost of sitting on empty housing. (Though the real motivation for an imputed-rental-income law is usually to combat tax fraud: people who're renting out apartments under the table and not reporting the income. It just has the secondary effect of making it more expensive to sit on vacant real estate.)
  - davidw 11y ago
    Yeah, something like that might work too, although it can be kind of invasive in the sense that now you need to check if people are living in a place. In Italy, that meant that the police send someone around for a look inside the house where you say you recently moved to. In theory, at least - they don't always.
    - _delirium 11y ago
      I guess it's easier in countries with some kind of address register. Denmark doesn't police it with physical police, just through the address register: you have an official principle residence, and can only list one. So by definition any other property you own is not owner-occupied. (At least in the cities, I think second homes outside the cities are handled differently.) You can get away with some cheating there, e.g. a couple who live together can claim to be living separately and rent the second one out under the table, or someone who lives with their parents can be dabbling in under-the-table real estate with an investment property they don't really live in. But it at least keeps it to that kind of small-scale thing; the couple can pretend to owner-occupy two properties when they really live in one, but they can't do it with five.
- AdrianB1 11y ago
  Higher taxes is not enough. Taxing property means you confiscate it piece by piece, the owner will have to pay or lose it, but given enough time the owner will pay more than the value of the property. Why go that slow and not go for it, confiscate all properties and be happy with it? You can always follow examples from the likes of North Korea. Just in case you don't get it: you can ask for taxes when you provide services, not when you vote to raise taxes. Not sure what are more expensive services the empty Chinese-owned houses require to tax for it. And blaming Chinese investment is just a straw man: if all the houses would be occupied by pure-breed white Caucasian Americans (that's a joke) who would you blame, Martians?
  - CPLX 11y ago
    Just wanted to compliment you on one of the most impressive substance-free arm-flailing retorts I have seen in recent memory. It takes skill to weave residents of both North Korea and the planet Mars into a discussion of Bay Area quality of life.
- dragonwriter 11y ago
  > Alternatively, repealing Prop 13, so that property taxes rise with the value. Or increasing property taxes as you get more homes. Both of these would decrease housing prices significantly. More significantly, they would mean that the increased demand for property driving prices would also result in increased public resources to deal with the issues produced.
pyrophane 11y ago
Or we could tax foreign investment properties at a higher rate. "Remove barriers and let the market work" isn't the only solution to any given problem.
- davidw 11y ago
  I'm definitely not a "markets fix all the world's problems" kind of guy. Far from it. But in this case I think it's a big part of the answer, and I'm not alone in that thinking either. This book was particularly good, although a bit high level: http://amzn.to/1rOgoq3 http://amzn.to/1rOgoq3 - and it's also noteworthy because the author, like myself, is somewhat left of center in terms of US politics.
_delirium 11y ago
That depends on a lot of factors. Manhattan is an example of a building boom not necessarily increasing supply or lowering prices: a lot of the building boom involved demolition of older, cheaper apartment buildings that were subdivided into small units, to be replaced with newer, higher-end apartment units subdivided into larger units. Net square footage increased, but square footage isn't identical to number of housing units. Which is why over the past 100 years Manhattan has gone from having cheap housing and 2.3 million people, to having expensive housing and 1.6 million people.
- davidw 11y ago
  Article about Manhattan rental prices dropping: http://ny.curbed.com/2016/4/7/11381852/manhattan-market-reports-rental-prices-drop http://ny.curbed.com/2016/4/7/11381852/manhattan-market-repo...

hkmurakami 11y ago

We made a pact with the devil when as a society we decided to believe that our primary homes would also double as investment vehicles that will appreciate in value and help us fund our retirement.

hnal943 11y ago
Except no one decided that - it falls naturally out of the facts that homes are expensive (and therefore represent a large chunk of the wealth of most people) and that homes do not depreciate very much as a result of people living in them.
- hkmurakami 11y ago
  > homes do not depreciate very much as a result of people living in them. I get what you are saying, but this part above isn't a "natural order of things". For example, homes in Japan are expensive (perhaps representing an even larger fraction of lifetime earnings than in the Statse) yet they depreciate like they are cars.
  - jff 11y ago
    They depreciate like they are cars because Japan focuses on the new. You don't buy a house, you buy the land, knock down the existing house, and build a new one. You don't buy a used car, you buy a new one unless you're broke. There's precious little used market for anything, which can be a boon to those of us who want to buy nice used film cameras from Japanese ebay sellers.
    - hkmurakami 11y ago
      except used video games and used books :) By the way Yahoo Auctions is much more popular than eBay in Japan so you might check that out.
  - jerf 11y ago
    Honest question: Why? My home is about 30 years old and honestly the only way you'd know that is by recognizing certain features and techniques that pin it to that general time period of construction and code requirements. It's not like everything shows "30 years of wear" on it. (Of course all the surfaces have been replaced at least once over time, but by mass of the house that's not that much; maintenance is maintenance.) So it seems sensible to me that it hasn't depreciated all that much, in the way that, say, a computer from the same time period is basically worth whichever is greater of "nostalgia" and "scrap metal" value.

ubernostrum 11y ago

Unused, speculative, investments. As I understand it, it's not really speculative, but rather is a way around China's currency controls. It's allegedly quite difficult, if you're Chinese, to convert holdings into USD or other currencies and get that money out of the country, and investing in foreign real estate is apparently a popular way to work around that

ASinclair 11y ago

The final slap in the face is that the investment is guarded from rising property taxes by Prop 13.

bubbleRefuge 11y ago

Same thing happening in South Florida only buyers are South American oligarchs/crooks. A good fix would be to charge much higher property tax rates for non-owner occupied single family residences.

marincounty 11y ago

I was floored when I heard it just takes a phone call in order to buy property in the United States. I would kinda understand if we were allowed the same reciprocity, but from what I gather; it's very difficult to buy property in most foreign countries. I can't even debate it too much, before someone call me a racist.

shenanigoat 11y ago

Absolutely. The same thing is happening here in Vancouver and it is eventually going to suck the life out of the city. Beautiful homes in formerly vibrant neighbourhoods are left empty...indefinitely...held as an investment by offshore owners. The governments (provincial, civil, and federal) have no intention of limiting foreign ownership so it will continue apace until nobody wants (or can afford) to live here. I rent a house that was bought in 2014 (when I moved in) for $800k and it's now worth $1.5M. Foreign investment is driving this.

rubicon33 11y ago
Ah! I was hoping someone from Vancouver might comment, as I have heard through the grapevine that there is HUGE foreign money (mainly from China) buying up land there, and driving prices sky high. Hadn't heard much else than rumor about it though. Hopefully Vancouver will figure something out, I hear it's a very nice place to live.