3 ms·

> Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit Mind citing a source for this? I've seen a situation where r

> Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit Mind citing a source for this? I've seen a situation where rents and house prices didn't both rise together. Maybe not precisely the same rate, there may be some noise from other factors, but within a few percentage points of each other. Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. In a housing shortage the people with high paying jobs rent decent places, everyone who makes less is forced to live with roommates or commute from further away and many leave the area altogether. And then in your example, that's not necessarily so crazy. Some of that $45k goes towards the mortgage interest which is tax deductible (in the US, not sure about Australia), and of course over time more and more of it goes to the principle so effectively paying yourself.

jbarham 8y ago
https://www.economist.com/graphic-detail/2018/02/09/the-economist-house-price-indices https://www.economist.com/graphic-detail/2018/02/09/the-econ... lets you play around with comparing house prices vs income and rents. In Australia (where I live) and Canada (where I'm from) house prices are more overvalued compared to rent than income (i.e., rents have increased slower than house prices). > Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. By definition renters must live in the are where they rent, and must work within commuting distance of where they rent (even if it's a very long commute). Landlords, however, can live anywhere, provided they have someone to manage their rented properties. E.g., my landlord lives in Singapore, but I pay my rent to a Melbourne based property management agency. But since I live (and work) in Melbourne my rent is set by the market rate in Melbourne, not the (much higher) rate in Singapore. Unfortunately for non-techies in SF, their rents have been pushed up massively due to the much higher tech salaries. But that only proves the strong correlation between rent and income. BTW, mortgage interest in not tax deductible in Australia. Somewhat crazily, however, rental losses on investment properties are tax deductible ("negative gearing").

jbarham 8y ago

https://www.economist.com/graphic-detail/2018/02/09/the-economist-house-price-indices https://www.economist.com/graphic-detail/2018/02/09/the-econ... lets you play around with comparing house prices vs income and rents. In Australia (where I live) and Canada (where I'm from) house prices are more overvalued compared to rent than income (i.e., rents have increased slower than house prices). > Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. By definition renters must live in the are where they rent, and must work within commuting distance of where they rent (even if it's a very long commute). Landlords, however, can live anywhere, provided they have someone to manage their rented properties. E.g., my landlord lives in Singapore, but I pay my rent to a Melbourne based property management agency. But since I live (and work) in Melbourne my rent is set by the market rate in Melbourne, not the (much higher) rate in Singapore. Unfortunately for non-techies in SF, their rents have been pushed up massively due to the much higher tech salaries. But that only proves the strong correlation between rent and income. BTW, mortgage interest in not tax deductible in Australia. Somewhat crazily, however, rental losses on investment properties are tax deductible ("negative gearing").