3 ms·

>leading to a boom in number of houses The requisite for this seems to be little or no govt intervention. In Akl, NZ, for example, you're only seeing high-end

>leading to a boom in number of houses The requisite for this seems to be little or no govt intervention. In Akl, NZ, for example, you're only seeing high-end homes being built yet prices & demand keeps going up for all housing. Now they're subsidizing projects for entry-level homes as if building a set number of homes (and failing to meet build targets by a long shot)will solve market woes.

AnthonyMouse 8y ago
There are zero problems with building mostly high-end homes. Then the rich can live there and the less rich can live where the rich previously lived -- win for everybody. One of the best things the government can do in those cases is ensure that large housing developments are still zoned to allow them to be subdivided. Nothing wrong with four families living in one big mansion.
- angmarsbane 8y ago
  Does this get thrown off if the rich don’t buy the new high end homes to live in?
  - JPKab 8y ago
    That doesn't happen in practice.
  - AnthonyMouse 8y ago
    > Does this get thrown off if the rich don’t buy the new high end homes to live in? Not really, it just implies that you should build even more of them. Soak up all the demand from rich speculating idiots, then let them take a haircut when it turns out you can build more housing than speculators have capital to buy with. As soon as they realize that prices are no longer going up, the speculation ends and normal people can go live in all the housing you've been building. It's not as if building a different kind of housing would change anything. If you built two smaller units instead of one bigger one, you don't think speculators would just buy both of them with the same amount of money? What you need is to get the supply to the point that it's clear speculation will not be profitable. There are also some known methods to discourage them, like vacancy taxes, if you're looking for a more immediate effect.
  - dan-robertson 8y ago
    If you’re a developer, build a bunch of high end housing, and try to sell it off, and no one wants to buy it, you have approximately three choices: 1. Leave them empty to deteriorate. 2. Cut your losses and sell them for cheap 3. Let them out for less than you feel they ought to be worth in the hope that people will be willing to pay your high price soon. Option 1. Is unlikely to happen as it is very unprofitable. This leaves options 2,3, each of which leads to people living in the newly built properties, so the total supply of housing has increased. Even if people are just renting, this means there is less demand for rentals so less of an incentive to buy houses to let them out, decreasing the demand for houses.
    - losteric 8y ago
      Developers rarely build blindly. If they build high-end housing, there is some demand which will definitely buy-in... and that opens a new option: 4. Wait, because operational expenses are cheap compared to the capital expenditure. They will set an asking lease that is guaranteed to attract enough high-rent leasers to pay for maintenance + loan interest (if any), then hold the price right there regardless of vacancy rates. Rates will be lower only if the market demographics irreversibly change, but otherwise they can afford to wait as the building slowly fills over a decade or more - each additional renter is pure profit, and raises the value of the building as an asset for resale. The alternative is lowering prices, which attracts a different demographic that makes it challenging to raise rates afterwards. They may generate more short-term income but overall value is lower.
      - AnthonyMouse 8y ago
        > 4. Wait, because operational expenses are cheap compared to the capital expenditure. The problem with waiting is that you're sitting on a huge risk, because holding prices artificially high attracts new construction. If that price makes construction profitable then construction will continue to be profitable until prices come down. To keep prices from coming down, the existing speculators would have to buy all of the new construction. The vacancy rate would keep increasing until it could no longer cover the maintenance costs. And the higher the vacancy rate gets, the greater the downside risk to holding vacant units, because there are more competing vacant units that the other owners could at any point decide to put on the market, causing lower prices that induce other owners to abandon the conspiracy and put their units on the market too. And the more vacant units there are, the more the price declines when the cartel dissolves.
- Latteland 8y ago
  No, that's not right. First, there might not be enough demand for the most expensive places, only so many people can buy a 20 million dollar apartment. There's no magic power law that means that supply of housing works in a way that someone stepping up always makes a space for someone below. Also, the cost of a top end place could often pay for many many more lower end housing. Generally it seems easier to make a profit on expensive housing or whatever, because cost matters less in the final profit (that takes lots of discipline to make profits on more units of cheaper things generally).
  - ironmagma 8y ago
    > only so many people can buy a 20 million dollar apartment Yes, and that's what turns the 20 million dollar apartment into a 10 million dollar apartment. If prices are too high, the market will correct for that by having apartment complexes needing to rent out units for less than they cost to build. That is why market research is important and should be on the developer to determine what there is demand for.
    - johnchristopher 8y ago
      I heard the market corrected in Spain by allowing multiple generation loans https://www.dailymail.co.uk/news/article-2537511/The-40-year-old-mortgage-pass-children-House-price-boom-forces-buyers-opt-two-generation-loans.html https://www.dailymail.co.uk/news/article-2537511/The-40-year...
OkGoDoIt 8y ago
Sounds like San Francisco. A decent amount of new construction recently but it’s all ludicrously expensive. Also there’s some small set asides for low income folks, but not nearly enough. And anyone in the middle is especially out of luck.
- losteric 8y ago
  SF has to deal with zoning restrictions. Between rapid immigration, the tech wealth boom, and restrictions on lot size/height/residency - obviously all the new constructions will be ludicrously expensive. "Affordable housing units" is so double speak. A few token units are subsidized so council members can say they're fighting for the general public, pulling the wool over lower/middle-class voters as they're slowly displaced. "Preserve our neighborhood character" (NIMBYism) is the other corrupt argument. The only thing they preserve is the rising value of their homes. Inevitably, the neighborhood is either white washed and rebuilt as wealth takes over or Manhattanized in a rush if the original residents wake up in time. People are the neighborhood character, maintaining cost of living is the only way to really maintain character. The middle path of proactive growth, raising density restrictions to avoid housing inflation, is difficult. People move to neighborhoods because they like it as-is... no one wants change until they are impacted, but by then they have no say in the results.

AnthonyMouse 8y ago

There are zero problems with building mostly high-end homes. Then the rich can live there and the less rich can live where the rich previously lived -- win for everybody. One of the best things the government can do in those cases is ensure that large housing developments are still zoned to allow them to be subdivided. Nothing wrong with four families living in one big mansion.

angmarsbane 8y ago
Does this get thrown off if the rich don’t buy the new high end homes to live in?
- JPKab 8y ago
  That doesn't happen in practice.
- AnthonyMouse 8y ago
  > Does this get thrown off if the rich don’t buy the new high end homes to live in? Not really, it just implies that you should build even more of them. Soak up all the demand from rich speculating idiots, then let them take a haircut when it turns out you can build more housing than speculators have capital to buy with. As soon as they realize that prices are no longer going up, the speculation ends and normal people can go live in all the housing you've been building. It's not as if building a different kind of housing would change anything. If you built two smaller units instead of one bigger one, you don't think speculators would just buy both of them with the same amount of money? What you need is to get the supply to the point that it's clear speculation will not be profitable. There are also some known methods to discourage them, like vacancy taxes, if you're looking for a more immediate effect.
- dan-robertson 8y ago
  If you’re a developer, build a bunch of high end housing, and try to sell it off, and no one wants to buy it, you have approximately three choices: 1. Leave them empty to deteriorate. 2. Cut your losses and sell them for cheap 3. Let them out for less than you feel they ought to be worth in the hope that people will be willing to pay your high price soon. Option 1. Is unlikely to happen as it is very unprofitable. This leaves options 2,3, each of which leads to people living in the newly built properties, so the total supply of housing has increased. Even if people are just renting, this means there is less demand for rentals so less of an incentive to buy houses to let them out, decreasing the demand for houses.
  - losteric 8y ago
    Developers rarely build blindly. If they build high-end housing, there is some demand which will definitely buy-in... and that opens a new option: 4. Wait, because operational expenses are cheap compared to the capital expenditure. They will set an asking lease that is guaranteed to attract enough high-rent leasers to pay for maintenance + loan interest (if any), then hold the price right there regardless of vacancy rates. Rates will be lower only if the market demographics irreversibly change, but otherwise they can afford to wait as the building slowly fills over a decade or more - each additional renter is pure profit, and raises the value of the building as an asset for resale. The alternative is lowering prices, which attracts a different demographic that makes it challenging to raise rates afterwards. They may generate more short-term income but overall value is lower.
    - AnthonyMouse 8y ago
      > 4. Wait, because operational expenses are cheap compared to the capital expenditure. The problem with waiting is that you're sitting on a huge risk, because holding prices artificially high attracts new construction. If that price makes construction profitable then construction will continue to be profitable until prices come down. To keep prices from coming down, the existing speculators would have to buy all of the new construction. The vacancy rate would keep increasing until it could no longer cover the maintenance costs. And the higher the vacancy rate gets, the greater the downside risk to holding vacant units, because there are more competing vacant units that the other owners could at any point decide to put on the market, causing lower prices that induce other owners to abandon the conspiracy and put their units on the market too. And the more vacant units there are, the more the price declines when the cartel dissolves.
Latteland 8y ago
No, that's not right. First, there might not be enough demand for the most expensive places, only so many people can buy a 20 million dollar apartment. There's no magic power law that means that supply of housing works in a way that someone stepping up always makes a space for someone below. Also, the cost of a top end place could often pay for many many more lower end housing. Generally it seems easier to make a profit on expensive housing or whatever, because cost matters less in the final profit (that takes lots of discipline to make profits on more units of cheaper things generally).
- ironmagma 8y ago
  > only so many people can buy a 20 million dollar apartment Yes, and that's what turns the 20 million dollar apartment into a 10 million dollar apartment. If prices are too high, the market will correct for that by having apartment complexes needing to rent out units for less than they cost to build. That is why market research is important and should be on the developer to determine what there is demand for.
  - johnchristopher 8y ago
    I heard the market corrected in Spain by allowing multiple generation loans https://www.dailymail.co.uk/news/article-2537511/The-40-year-old-mortgage-pass-children-House-price-boom-forces-buyers-opt-two-generation-loans.html https://www.dailymail.co.uk/news/article-2537511/The-40-year...

OkGoDoIt 8y ago

Sounds like San Francisco. A decent amount of new construction recently but it’s all ludicrously expensive. Also there’s some small set asides for low income folks, but not nearly enough. And anyone in the middle is especially out of luck.

losteric 8y ago
SF has to deal with zoning restrictions. Between rapid immigration, the tech wealth boom, and restrictions on lot size/height/residency - obviously all the new constructions will be ludicrously expensive. "Affordable housing units" is so double speak. A few token units are subsidized so council members can say they're fighting for the general public, pulling the wool over lower/middle-class voters as they're slowly displaced. "Preserve our neighborhood character" (NIMBYism) is the other corrupt argument. The only thing they preserve is the rising value of their homes. Inevitably, the neighborhood is either white washed and rebuilt as wealth takes over or Manhattanized in a rush if the original residents wake up in time. People are the neighborhood character, maintaining cost of living is the only way to really maintain character. The middle path of proactive growth, raising density restrictions to avoid housing inflation, is difficult. People move to neighborhoods because they like it as-is... no one wants change until they are impacted, but by then they have no say in the results.