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" just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all ov
by alexasmyths 9y ago
" just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world"
If there is excess capital, it's the fault of the central banks.
No.
The issue is corruption and lack of distribution of surpluses in developing economies, specifically China.
Think: China is poor on a per-capita basis. So why are so many Chinese trying to hard to get their $$$ out of there? Mass corruption etc..
Westerners send a lot of $$$ to China - and if there were labour laws, environmental laws (i.e. democracy) then those surpluses would be spread more evenly across China. 'Regular' chinese people want to buy a home, a car a TV - but since the money is so heavily focused on a small portion of citizens - they have 'mass surpluses' and want to get their money out. So it comes back to the West.
You mentioned 'lack of investment' - this can't be the case - as there are still hundreds of millions of Chinese people who still don't have proper homes and are way behind in terms of material standards of living.
If they were paid more - they'd have more surplus $ to spend on 'homes and stuff' and guess what? Local investments would make more sense.
We can't have free trade with nations that regulate their economies in fundamentally different ways than ours. If a country for example, allows mass pollution - well - that externalization is a massive economic advantage, kind of like a 'government subsidy'.
The best way to deflate the Western housing bubble - and to fix the internal problems in China is to spread the wealth in China. Arguably US needs a little more of this as well.
- Retric 9y agoIt does not matter if houses are priced in dollars or donuts, they are increasing in value because of an oversupply of capital sloshing around looking for investments. Wealth is not currency wealth is things of value, and we have systemic issues with profits from investments being reinvested instead of being spent, as everyone is looking for returns. This inflates the value of things that create future income streams.
- alexasmyths 9y agoNo, not an 'oversupply of capital' , rather a lot of capital in the hands of a few. And low interest rates. It only takes about 5% of home buyers to be foreign buyers who are 'price inelastic' (i.e. they will pay above market/any price) to create a housing bubble. If the capital were not in their hands, but more distributed through the NZ economy, I suggest that capital would be deployed differently than just in real estate.
- Retric 9y agoHousing without renters is not a productive investment.* If it seems appealing it's only because there is a dearth of productive investments available. *Like gold it can act as a hedge, but long term inflation they has negative returns when you include maintenance costs aka vaults are not free.
- tmnvix 9y ago> If it seems appealing it's only because there is a dearth of productive investments available. ...or perhaps property investment is encouraged by the tax system, is favoured by lenders, etc.
- alexasmyths 9y ago"Housing without renters is not a productive investment." Agreed. And guess what - many of the foreign buyers leave the homes empty. That they would even do this is evidence of how crazy the economic mismatch is. Which is why foreigners should not be able to buy property. Doubly important if they are not going to live in it.
- eecc 9y agoHi, we here did you get that 5% figure? Just curious
- alexasmyths 9y agoFrom the number of Toronto buyers of property who are foreign.