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> Housing prices across the world are insane, They only are insane if you insist on living centrally in large cities. Which you can't do anyway if you live in

> Housing prices across the world are insane, They only are insane if you insist on living centrally in large cities. Which you can't do anyway if you live in a van. So it's hard to give a lot of weight to this prediction.

randomsearch 6y ago
I think they’re just insane generally. Almost everywhere in the U.K., housing is much more expensive than the cost of building it. This is really beginning to concern me. I think we’ve created a fake plastic economy built on face plastic house prices. By stoking the bubble, the purchase and renovation of housing keeps pushing money through the economy. By constantly remortgaging, new value is “created” which allows people to have a new kitchen, go on holiday, buy a car, extend their house. But it feels like a trick to me. I’m not an economist, but where’s the wealth creation here? As a result of the forever rising prices, foreign investors buy properties, often leaving them empty. They see the game the government is playing and exploit it. Feels like the U.K. government doesn’t have a Plan B. They don’t know how to create a strong economy so they turn to retail and the housing market. Surely the wheels have to fall off at some point?
- ptrincr 6y ago
  > This is really beginning to concern me. I think we’ve created a fake plastic economy built on face plastic house prices. By stoking the bubble, the purchase and renovation of housing keeps pushing money through the economy. This has been an issue for a long time now. There should have been a crash in 2008/2009 but instead the government in the UK decided to prop up house prices with various schemes. I'm not saying this is right or wrong, for many people, house owners and people looking to purchase, this helped people stay out of negative equity/allowed people to purchase their own home. > By constantly remortgaging, new value is “created” which allows people to have a new kitchen, go on holiday, buy a car, extend their house. But it feels like a trick to me. I’m not an economist, but where’s the wealth creation here? I'm not sure remortgaging is creating new value. All money is loaned into existence, remortgaging is just creating new debt secured on your home. It still has to be paid back. People could still get loans, just not perhaps at the same favorable rate. There has been a lot of money printing over the past 10 years or so, I think rising house prices are a natural result of that. I think it's more of a case of decreasing purchasing power of the £ in your pocket, rather than homes rising in value. Have a look at this chart when house prices are compared with gold[0]. It's also a function of the availability of loans, since now you can borrow cheaply over long periods, this increases the total amount people are able to borrow, as it's much easier to service the debt. What's more surprising to me is that we're not really seeing inflation in other areas of the economy, such as wages or consumer goods. Inflation has been surprising low since the crisis of 2008/2009. [0] http://pricedingold.com/uk-house-prices/ http://pricedingold.com/uk-house-prices/
  - randomsearch 6y ago
    Was hoping someone would reply and convince me I was wrong rather than agree :-/ “Value” in quotes because it isn’t, as you said. Regarding inflation: I think house price rises have been stoked by the stamp duty trick once again, but agree that there may also be a bit of inflation mixed in. The reason we’re not seeing general inflation yet is the extra money supply has yet to leave bank accounts and move through the consumer economy. After things open up, we should see that money being spent and a short term boom, then as demand rises prices will respond and we’ll see inflation. At least according to Keynes, who in retrospect just seems to be more and more correct. Wages won’t rise at the same pace because employers will exploit inflation, the trade unions are weak, and the govt doesn’t care - 120K dead and the Tories are seven points ahead, reality doesn’t matter in U.K. politics.
  - bananaface 6y ago
    Getting a mortgage isn't purchasing a home, paying off a mortgage is purchasing a home. The bank owns your home when you get a mortgage, and they have the right to sell if you miss even your last payment. If the housing market crashes 30% tomorrow it'll bankrupt everyone who signed on for a 30-year mortgage in the last 10 years, unless they've overpaid substantially. Very few leveraged first time buyers who bought since 2008 own their homes yet.
- pjc50 6y ago
  Most of the price is in the land value. And quite a lot of the bubble money is from overseas, as you've spotted. The UK is using housing as an export industry. One of the few export industries unaffected by Brexit. UK retail is just wrecked. Even before the pandemic it wasn't great.
- Erlich_Bachman 6y ago
  >housing is much more expensive than the cost of building it. Why would you expect to only pay for the price of building it? There is also a lot of value in land itself, the view from it, the infrastructure around that land, what other people (And businesses, and schools, airports, restaurants, etc. etc. etc.) live there in close proximity. What laws are in place on that general part of earth... There is so much more at play here than "cost of building it".
dredmorbius 6y ago
If you look at the net of local affordability, access, and availability, the problem is widespread. Housing has become a principle (and one of the largest) asset classes. The things that make it suitable for investing are precisely the same attributes that make it inaccessible, especially to the young, poor, old, and otherwise disadvantaged. Flyover-state housing may be affordable by SF / New York / LA / Chicago standards. It's often not affordable to locals themselves. And services (data, power, food, support, healthcare, education) are often far below standards typical on the coasts / near major metros.
- thecardcheat 6y ago
  All of this - and maintenance. The house that may be "inexpensive" re: sale price may cost just as much to fix. The cost of fixing X sq ft of thing or replacing appliance Y may certainly increase with the size of the home, but even small homes can have major expenses (and if you are in a "cheaper" area this means more home for less, so more to fix). Lack of regulation in places without rigid building code enforcement can also make it hard to find people who aren't hacks (if you can find people at all) in construction.
- maxerickson 6y ago
  Power and internet in small towns (and anywhere larger) isn't "far below" the standards on the coasts, the internet is fast and power is reliable. There's a lot less restaurants, and they are all the same, and grocers tend not to stock quite as much variety, so those are more true. Education and healthcare are a lot more variable. I expect having to travel further tends to be the biggest difference in healthcare.
  - dredmorbius 6y ago
    Internet quality ... varies heavily. Newer development tends to be better. The issue with power has more to do without outages. In urban areas, these may last a few hours, excepting major incidents (hurricanes, earthquakes). In rural regions, outages may span days, even weeks. Outside the US (or outside mainland US, as in Puerto Rico), even longer. "Services" includes retail and technical capacities -- whether it's local computer repair or someone who knows how to do basic cabling. Again: cities offer a much more diverse economy, with far more specialties than rural regions do. This may not be debilitating, but it is a factor to consider.
tkiolp4 6y ago
Large cities is where jobs are. 90% of the jobs out there are non remote.

randomsearch 6y ago

I think they’re just insane generally. Almost everywhere in the U.K., housing is much more expensive than the cost of building it. This is really beginning to concern me. I think we’ve created a fake plastic economy built on face plastic house prices. By stoking the bubble, the purchase and renovation of housing keeps pushing money through the economy. By constantly remortgaging, new value is “created” which allows people to have a new kitchen, go on holiday, buy a car, extend their house. But it feels like a trick to me. I’m not an economist, but where’s the wealth creation here? As a result of the forever rising prices, foreign investors buy properties, often leaving them empty. They see the game the government is playing and exploit it. Feels like the U.K. government doesn’t have a Plan B. They don’t know how to create a strong economy so they turn to retail and the housing market. Surely the wheels have to fall off at some point?

ptrincr 6y ago
> This is really beginning to concern me. I think we’ve created a fake plastic economy built on face plastic house prices. By stoking the bubble, the purchase and renovation of housing keeps pushing money through the economy. This has been an issue for a long time now. There should have been a crash in 2008/2009 but instead the government in the UK decided to prop up house prices with various schemes. I'm not saying this is right or wrong, for many people, house owners and people looking to purchase, this helped people stay out of negative equity/allowed people to purchase their own home. > By constantly remortgaging, new value is “created” which allows people to have a new kitchen, go on holiday, buy a car, extend their house. But it feels like a trick to me. I’m not an economist, but where’s the wealth creation here? I'm not sure remortgaging is creating new value. All money is loaned into existence, remortgaging is just creating new debt secured on your home. It still has to be paid back. People could still get loans, just not perhaps at the same favorable rate. There has been a lot of money printing over the past 10 years or so, I think rising house prices are a natural result of that. I think it's more of a case of decreasing purchasing power of the £ in your pocket, rather than homes rising in value. Have a look at this chart when house prices are compared with gold[0]. It's also a function of the availability of loans, since now you can borrow cheaply over long periods, this increases the total amount people are able to borrow, as it's much easier to service the debt. What's more surprising to me is that we're not really seeing inflation in other areas of the economy, such as wages or consumer goods. Inflation has been surprising low since the crisis of 2008/2009. [0] http://pricedingold.com/uk-house-prices/ http://pricedingold.com/uk-house-prices/
- randomsearch 6y ago
  Was hoping someone would reply and convince me I was wrong rather than agree :-/ “Value” in quotes because it isn’t, as you said. Regarding inflation: I think house price rises have been stoked by the stamp duty trick once again, but agree that there may also be a bit of inflation mixed in. The reason we’re not seeing general inflation yet is the extra money supply has yet to leave bank accounts and move through the consumer economy. After things open up, we should see that money being spent and a short term boom, then as demand rises prices will respond and we’ll see inflation. At least according to Keynes, who in retrospect just seems to be more and more correct. Wages won’t rise at the same pace because employers will exploit inflation, the trade unions are weak, and the govt doesn’t care - 120K dead and the Tories are seven points ahead, reality doesn’t matter in U.K. politics.
- bananaface 6y ago
  Getting a mortgage isn't purchasing a home, paying off a mortgage is purchasing a home. The bank owns your home when you get a mortgage, and they have the right to sell if you miss even your last payment. If the housing market crashes 30% tomorrow it'll bankrupt everyone who signed on for a 30-year mortgage in the last 10 years, unless they've overpaid substantially. Very few leveraged first time buyers who bought since 2008 own their homes yet.
pjc50 6y ago
Most of the price is in the land value. And quite a lot of the bubble money is from overseas, as you've spotted. The UK is using housing as an export industry. One of the few export industries unaffected by Brexit. UK retail is just wrecked. Even before the pandemic it wasn't great.
Erlich_Bachman 6y ago
>housing is much more expensive than the cost of building it. Why would you expect to only pay for the price of building it? There is also a lot of value in land itself, the view from it, the infrastructure around that land, what other people (And businesses, and schools, airports, restaurants, etc. etc. etc.) live there in close proximity. What laws are in place on that general part of earth... There is so much more at play here than "cost of building it".

dredmorbius 6y ago

If you look at the net of local affordability, access, and availability, the problem is widespread. Housing has become a principle (and one of the largest) asset classes. The things that make it suitable for investing are precisely the same attributes that make it inaccessible, especially to the young, poor, old, and otherwise disadvantaged. Flyover-state housing may be affordable by SF / New York / LA / Chicago standards. It's often not affordable to locals themselves. And services (data, power, food, support, healthcare, education) are often far below standards typical on the coasts / near major metros.

thecardcheat 6y ago
All of this - and maintenance. The house that may be "inexpensive" re: sale price may cost just as much to fix. The cost of fixing X sq ft of thing or replacing appliance Y may certainly increase with the size of the home, but even small homes can have major expenses (and if you are in a "cheaper" area this means more home for less, so more to fix). Lack of regulation in places without rigid building code enforcement can also make it hard to find people who aren't hacks (if you can find people at all) in construction.
maxerickson 6y ago
Power and internet in small towns (and anywhere larger) isn't "far below" the standards on the coasts, the internet is fast and power is reliable. There's a lot less restaurants, and they are all the same, and grocers tend not to stock quite as much variety, so those are more true. Education and healthcare are a lot more variable. I expect having to travel further tends to be the biggest difference in healthcare.
- dredmorbius 6y ago
  Internet quality ... varies heavily. Newer development tends to be better. The issue with power has more to do without outages. In urban areas, these may last a few hours, excepting major incidents (hurricanes, earthquakes). In rural regions, outages may span days, even weeks. Outside the US (or outside mainland US, as in Puerto Rico), even longer. "Services" includes retail and technical capacities -- whether it's local computer repair or someone who knows how to do basic cabling. Again: cities offer a much more diverse economy, with far more specialties than rural regions do. This may not be debilitating, but it is a factor to consider.

tkiolp4 6y ago

Large cities is where jobs are. 90% of the jobs out there are non remote.