5 ms·

Every city in the world believe they're in a housing bubble. People can't just fathom the fact that there are many, many people richer than them, and the fact t

by tajen 10y ago

Every city in the world believe they're in a housing bubble. People can't just fathom the fact that there are many, many people richer than them, and the fact they can't afford a house is just that they don't earn enough compared to their neighbors. It's especially good to say "housing bubble" because it sounds smart as a market analysis from someone who has a lot of data, and it can only be proven wrong years later (when the comment is long gone) when the bubble is not burst, proving the new housing prices just reflect your neighbors' average wealth. "but the bubble is around the corner", they'll still say. Every city in the world. Housing prices grow according to people's wealth; there are also more and more people in every city, that increases the pressure on prices and it's rarely a bubble.

falsedan 10y ago
Downvoting for the massive sense of entitlement shown, which is high even for HN! Lots of global cities do have bubbles from foreign investment parking wealth in property, driving up prices and squeezing out locals looking to buy. Here's how it works: Foreign investors buy luxury properties Top-tier locals can't buy luxury properties, buy the next highest property class Second-tier etc. Lower-rung locals have no properties to buy. Not: they don't have enough money; but the property type they would traditionally occupy isn't available, and no alternatives have been built since it's always in a developer's best interest to aim at the top, in the abscesses of government incentives.
- tajen 10y ago
  Ok, I understand and I reckon (Note that I belong to the people who can't afford a property, btw, but I've lived in a few cities in the world). What you describe doesn't sound like a bubble to me: It's not something that blows then bursts. That's just that foreigners are richer than locals.
  - sprafa 10y ago
    Lots of countries don't allow foreigners do buy property in this way to prevent exactly this sort of Bubble. What might be happening (I think, seen no evidence yet) is that asset managers in banking have moved "safe" money from treasury debt to real estate, because return from treasury debt has moved to close to 0 since 2008. The result is billions of dollars have moved into real estate across the world, fueling what seems to be an increasingly global real estate crisis.
  - falsedan 10y ago
    The bubble pops when property is not as safe/lucrative of an investment as other instruments, and the foreign investors sell up. House prices go down, but no one can move because their mortgages are underwater (proceeds from selling the house don't match the outstanding debt). Developers stop building because no one will buy the new-builds at a price which will leave them with a profit. The situation is as before the bubble pops, but now everyone is poorer since their (inflated) home equity has vanished. Usually this happens when interest rates go up, because then it's better to keep your wealth in a more liquid investment like cash. Mortgage payments go up as well, turning the (imaginary) loss of equity into concrete loss of income.
    - XorNot 10y ago
      The bubble pops once the big development firms start going under. At some point, the highly leveraged property developers will stop being able to clear out the apartment blocks they're putting up presuming $1m+ sale prices. They're the ones who pop the bubble, since a few bankruptcies are very likely to cascade into panic selling.
      - falsedan 10y ago
        They go under when buyers stop showing up. It's the buyers. Think: where does their money come from? (from buyers)
  - catmanjan 10y ago
    It is a bubble as it only continues for as long as the government allows - eventually the house owning majority will die, the next generation will be jaded and demand stricter controls. I guess that's what the locals have over the rich internationals, a vote.
  - taneq 10y ago
    International gentrification?
- mnw21cam 10y ago
  > in the abscesses of government incentives. Nice typo. (And nice image.)
  - falsedan 10y ago
    I swear, iOS autocorrect goes back and changes words after you spell them correctly…
- MarkMc 10y ago
  Check out the under/over valuation graph on this page: http://www.economist.com/news/finance-and-economics/21695912-valuations-globalised-cities-are-rising-much-faster-their http://www.economist.com/news/finance-and-economics/21695912... Seems to be objective evidence that house prices in Canada, UK and Australia are overvalued, while house prices in US, Germany and Netherlands are not.
nimchimpsky 10y ago
I agree with you, I live in sydney. Everyone I know over 30 owns a house, and some bought quite recently. Except me (due to a variety of reasons, finance not one of them)

by tajen 10y ago

falsedan 10y ago

Downvoting for the massive sense of entitlement shown, which is high even for HN! Lots of global cities do have bubbles from foreign investment parking wealth in property, driving up prices and squeezing out locals looking to buy. Here's how it works: Foreign investors buy luxury properties Top-tier locals can't buy luxury properties, buy the next highest property class Second-tier etc. Lower-rung locals have no properties to buy. Not: they don't have enough money; but the property type they would traditionally occupy isn't available, and no alternatives have been built since it's always in a developer's best interest to aim at the top, in the abscesses of government incentives.

tajen 10y ago
Ok, I understand and I reckon (Note that I belong to the people who can't afford a property, btw, but I've lived in a few cities in the world). What you describe doesn't sound like a bubble to me: It's not something that blows then bursts. That's just that foreigners are richer than locals.
- sprafa 10y ago
  Lots of countries don't allow foreigners do buy property in this way to prevent exactly this sort of Bubble. What might be happening (I think, seen no evidence yet) is that asset managers in banking have moved "safe" money from treasury debt to real estate, because return from treasury debt has moved to close to 0 since 2008. The result is billions of dollars have moved into real estate across the world, fueling what seems to be an increasingly global real estate crisis.
- falsedan 10y ago
  The bubble pops when property is not as safe/lucrative of an investment as other instruments, and the foreign investors sell up. House prices go down, but no one can move because their mortgages are underwater (proceeds from selling the house don't match the outstanding debt). Developers stop building because no one will buy the new-builds at a price which will leave them with a profit. The situation is as before the bubble pops, but now everyone is poorer since their (inflated) home equity has vanished. Usually this happens when interest rates go up, because then it's better to keep your wealth in a more liquid investment like cash. Mortgage payments go up as well, turning the (imaginary) loss of equity into concrete loss of income.
  - XorNot 10y ago
    The bubble pops once the big development firms start going under. At some point, the highly leveraged property developers will stop being able to clear out the apartment blocks they're putting up presuming $1m+ sale prices. They're the ones who pop the bubble, since a few bankruptcies are very likely to cascade into panic selling.
    - falsedan 10y ago
      They go under when buyers stop showing up. It's the buyers. Think: where does their money come from? (from buyers)
- catmanjan 10y ago
  It is a bubble as it only continues for as long as the government allows - eventually the house owning majority will die, the next generation will be jaded and demand stricter controls. I guess that's what the locals have over the rich internationals, a vote.
- taneq 10y ago
  International gentrification?
mnw21cam 10y ago
> in the abscesses of government incentives. Nice typo. (And nice image.)
- falsedan 10y ago
  I swear, iOS autocorrect goes back and changes words after you spell them correctly…
MarkMc 10y ago
Check out the under/over valuation graph on this page: http://www.economist.com/news/finance-and-economics/21695912-valuations-globalised-cities-are-rising-much-faster-their http://www.economist.com/news/finance-and-economics/21695912... Seems to be objective evidence that house prices in Canada, UK and Australia are overvalued, while house prices in US, Germany and Netherlands are not.

nimchimpsky 10y ago

I agree with you, I live in sydney. Everyone I know over 30 owns a house, and some bought quite recently. Except me (due to a variety of reasons, finance not one of them)