4 ms·

Because it can lead to a market where the price of the goods is much higher, meaning a greater portion of their wealth has to go to housing than would otherwise

Because it can lead to a market where the price of the goods is much higher, meaning a greater portion of their wealth has to go to housing than would otherwise (on top of receiving no ownership stake) To illustrate, let's say there are no buy-to-let landlords. Let's also assume the majority have a strong preference to purchase a property over renting (a potentially "better") one (which they do in the UK). Currently (esp. with the presence of cheap credit), individuals are constrained not by their monthly outgoings (as they would be with rent) but with the amount of leverage the bank will permit them (i.e. their existing capital). This means the market stabilises at a lower monthly ongoing than it would do if there were no capital constraints. Thus, once buy-to-let landlords with significantly more capital participate, individuals can be "priced" out of the purchase market they would otherwise participate in. They are instead forced to participate in a rental market that has no capital requirements. Thus, the prices are no longer constrained and can rise. This can quite reasonably be seen as an unpleasant situation for everyone currently with limited capital - as they are further prevented from obtaining more capital, by both having less disposable income and not receiving the capital they would have from ownership of their property.

mafribe 10y ago
What you are arguing for is zero deposit mortgages. They are a terrible idea, because they encourage irresponsible risk taking in two ways: - People who are not stable enough to be able to carry a mortgage until it's paid off suddenly can buy dwellings. - It fuels speculation: just get a dwelling in a desirable area, wait for a year and flip it. Indeed this was what caused the financial crisis of 2007–2008. Do you want to go back to this? Asking for ~ 1/3 of the dwelling's price as deposit is a good (and time-tested) heuristic for filtering out those who have a substantially high probability of being financially irresponsible. prevented from obtaining more capital Typically owners of buy-to-let do not acquire more capital while paying off the property. They only do so after the 2nd mortgage is paid off, which is typially when they retire.
- sobani 10y ago
  In the Netherlands zero deposit mortgages for your primary home are the default. While there have been shenanigans in the past, up to so called 'career mortgages', where the mortgage amount was based on your career potential, nowadays the lending norms are pretty strict. I guess it helps there is a 2% tax on the total sum when buying a house, so flipping becomes even less attractive. At least I've never heard anyone about flipping, that is a foreign concept to us. According to a graph[0] I found housing prices dropped 15-25% between 2008 and 2013. But I feel this was caused by the financial crisis, not the other way around. Yes, a lot of mortgages went under water, but there is simple fix for that: don't move. Requiring 1/3 down payment seems like it wouldn't allow anyone to buy a home. That would basically require you to 'pay' the mortgage twice, once as rent and once as savings, for about 10 years. Using the average income of €35K, which leads to a max mortgage of €154K, you suggest not living in a home worth over €77K?? I'm not even sure those exist. [0] https://www.berekenhet.nl/nieuws/prijsontwikkeling-huizenprijzen.html https://www.berekenhet.nl/nieuws/prijsontwikkeling-huizenpri... (the lines are different types of homes)

mafribe 10y ago

What you are arguing for is zero deposit mortgages. They are a terrible idea, because they encourage irresponsible risk taking in two ways: - People who are not stable enough to be able to carry a mortgage until it's paid off suddenly can buy dwellings. - It fuels speculation: just get a dwelling in a desirable area, wait for a year and flip it. Indeed this was what caused the financial crisis of 2007–2008. Do you want to go back to this? Asking for ~ 1/3 of the dwelling's price as deposit is a good (and time-tested) heuristic for filtering out those who have a substantially high probability of being financially irresponsible. prevented from obtaining more capital Typically owners of buy-to-let do not acquire more capital while paying off the property. They only do so after the 2nd mortgage is paid off, which is typially when they retire.

sobani 10y ago
In the Netherlands zero deposit mortgages for your primary home are the default. While there have been shenanigans in the past, up to so called 'career mortgages', where the mortgage amount was based on your career potential, nowadays the lending norms are pretty strict. I guess it helps there is a 2% tax on the total sum when buying a house, so flipping becomes even less attractive. At least I've never heard anyone about flipping, that is a foreign concept to us. According to a graph[0] I found housing prices dropped 15-25% between 2008 and 2013. But I feel this was caused by the financial crisis, not the other way around. Yes, a lot of mortgages went under water, but there is simple fix for that: don't move. Requiring 1/3 down payment seems like it wouldn't allow anyone to buy a home. That would basically require you to 'pay' the mortgage twice, once as rent and once as savings, for about 10 years. Using the average income of €35K, which leads to a max mortgage of €154K, you suggest not living in a home worth over €77K?? I'm not even sure those exist. [0] https://www.berekenhet.nl/nieuws/prijsontwikkeling-huizenprijzen.html https://www.berekenhet.nl/nieuws/prijsontwikkeling-huizenpri... (the lines are different types of homes)