5 ms·

the value of the property increases over time Is this a law of nature?

by mafribe 9y ago

shafiqissani 9y ago
I'd rather say the value of the property is related to human population. Human population generally keeps growing.
- supernovae 9y ago
  As a society, we should address this. I'm more a fan of spreading ourselves across the cosmos and stepping off the planet than say mandated controls here, but it is something we should be discussing. There is a point in time where there isn't enough world for all the people on the world to live a moral life. (and its odd we seem comfortable in many ways that "War" is this answer..)
  - Finnucane 9y ago
    Virtually everyone alive now is going to die on this planet, and their children, and their children's children. It's vaguely possible that someday we may find a place elsewhere for future generations to destroy eventually also, But no more than a tiny few are going to get to go; it will make no difference to the people left behind. We will have to continue to struggle on with what we have.
- Finnucane 9y ago
  Sure, but real estate markets are local. At least in the US, there are plenty of places where real estate prices are not increasing, because local populations are not increasing, wages are not increasing, and wealthy foreign investors are not looking to park their money in places where real estate prices aren't going up quickly. So, yeah, in a broad, long-term statistical measure, re prices do tend to increase over time, but the distribution is far from consistent or uniform.
- misja111 9y ago
  It is also related to the height of the mortgage rate; higher rates means more people cannot afford to buy a house, so house prices go down. With the current unprecedented low interest rate levels it is hard to imagine, but there was a time that mortgage rates were above 10%. And there is no fundamental reason why they couldn't go back to those levels one day.
walrus1066 9y ago
In the UK it is. The market is too big to fail. The government props up the market, because otherwise they'll get booted out by the millions who have staked their retirement on property, plus the taxpayer owns £ billions of equity via the help to buy scheme, so the govt takes a direct hit of prices go down. Local homeowners prop it up by ensuring no new housing gets built near them. On the monetary side, the bank of England props up the market (e.g. funding for lending scheme), because our economy couldn't handle a crash, our banks are loaded to the gills with mortgage debt, they don't have enough capital to withstand a crash.
- tonyedgecombe 9y ago
  No, I lost 25% of the value of my first property after buying at the peak in the eighties. Prices can fall and sometimes the government can't or won't stop it.
  - walrus1066 9y ago
    Sure, it's not impossible, but there's a powerful alliance of political and economic forces that will do their utmost to prevent this from happening. I can only see three scenarios where prices fall materially: a) big interest rate hike (I believe this caused the 89 crash) b) massive increase in homebuilding (250k+ p/a, sustained) c) mass emigration out of the UK. I really doubt a) will happen, the BOE is loathe to raise rates as our household debt is 90% of GDP, twice what it was in 1990, our economy wouldn't handle it, our banks would be insolvent as they have <5% capital. Inflation would need to be double digits before the BOE's hand is forced. b) also very unlikely. Homeowners make up the biggest voting block, a huge vested interest group. The green belt is a sacred cow. Every time the govt hints at liberalising the planning system, the mail+telegraph kick up a 'hands off our land' campaign. c) maybe if brexit goes really badly, but we'd be in a true economic catastrophe if this happens. Probably wouldn't have a job with which to pay for cheaper housing.
    - tonyedgecombe 9y ago
      "Sure, it's not impossible" I'd say it's inevitable, the only question is when.
chvid 9y ago
Law of nature ... maybe not ... But law of politics and finance - yes.

the value of the property increases over time Is this a law of nature?

shafiqissani 9y ago

I'd rather say the value of the property is related to human population. Human population generally keeps growing.

supernovae 9y ago
As a society, we should address this. I'm more a fan of spreading ourselves across the cosmos and stepping off the planet than say mandated controls here, but it is something we should be discussing. There is a point in time where there isn't enough world for all the people on the world to live a moral life. (and its odd we seem comfortable in many ways that "War" is this answer..)
- Finnucane 9y ago
  Virtually everyone alive now is going to die on this planet, and their children, and their children's children. It's vaguely possible that someday we may find a place elsewhere for future generations to destroy eventually also, But no more than a tiny few are going to get to go; it will make no difference to the people left behind. We will have to continue to struggle on with what we have.
Finnucane 9y ago
Sure, but real estate markets are local. At least in the US, there are plenty of places where real estate prices are not increasing, because local populations are not increasing, wages are not increasing, and wealthy foreign investors are not looking to park their money in places where real estate prices aren't going up quickly. So, yeah, in a broad, long-term statistical measure, re prices do tend to increase over time, but the distribution is far from consistent or uniform.
misja111 9y ago
It is also related to the height of the mortgage rate; higher rates means more people cannot afford to buy a house, so house prices go down. With the current unprecedented low interest rate levels it is hard to imagine, but there was a time that mortgage rates were above 10%. And there is no fundamental reason why they couldn't go back to those levels one day.

walrus1066 9y ago

In the UK it is. The market is too big to fail. The government props up the market, because otherwise they'll get booted out by the millions who have staked their retirement on property, plus the taxpayer owns £ billions of equity via the help to buy scheme, so the govt takes a direct hit of prices go down. Local homeowners prop it up by ensuring no new housing gets built near them. On the monetary side, the bank of England props up the market (e.g. funding for lending scheme), because our economy couldn't handle a crash, our banks are loaded to the gills with mortgage debt, they don't have enough capital to withstand a crash.

tonyedgecombe 9y ago
No, I lost 25% of the value of my first property after buying at the peak in the eighties. Prices can fall and sometimes the government can't or won't stop it.
- walrus1066 9y ago
  Sure, it's not impossible, but there's a powerful alliance of political and economic forces that will do their utmost to prevent this from happening. I can only see three scenarios where prices fall materially: a) big interest rate hike (I believe this caused the 89 crash) b) massive increase in homebuilding (250k+ p/a, sustained) c) mass emigration out of the UK. I really doubt a) will happen, the BOE is loathe to raise rates as our household debt is 90% of GDP, twice what it was in 1990, our economy wouldn't handle it, our banks would be insolvent as they have <5% capital. Inflation would need to be double digits before the BOE's hand is forced. b) also very unlikely. Homeowners make up the biggest voting block, a huge vested interest group. The green belt is a sacred cow. Every time the govt hints at liberalising the planning system, the mail+telegraph kick up a 'hands off our land' campaign. c) maybe if brexit goes really badly, but we'd be in a true economic catastrophe if this happens. Probably wouldn't have a job with which to pay for cheaper housing.
  - tonyedgecombe 9y ago
    "Sure, it's not impossible" I'd say it's inevitable, the only question is when.

chvid 9y ago

Law of nature ... maybe not ... But law of politics and finance - yes.