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Price-to-rent and price-to-income ratios are useful metrics in diagnosing if a price rise is a true 'bubble' in the sense of misdirected investment. If the pric
by Finnucane 6y ago
Price-to-rent and price-to-income ratios are useful metrics in diagnosing if a price rise is a true 'bubble' in the sense of misdirected investment. If the price to own is rising much faster than rentthe assumption is that excess capital is being directed into the market, rather than price rises driven purely by demand for housing. During the Great Bubble of the early 2000s, downpayments shrank and credit quality dropped as riskier and riskier (and blatantly fraudulent) credit practices were employed to prop up the market.
- jbverschoor 6y agoThe thing is, it's not. It is the exact opposite until this quarter.. The price-to-rent here is more and more in favor of buying, even with prices up 100%. So I don't know what numbers they're looking at. This, partially, was stopped by limiting airbnb days per year and in certain parts completely. Also, the current covid situation is not helping for cities. There is no risky credit anymore, it's more difficult to get a mortgage.. You need to bring quite some cash yourself, as they won't finance as much as they used to. And then some people don't even use financing at all, and simply pay cash.