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Yes - GP is right. When they say regulation, they mean preventing market forces from building as much prices allow. This NIMBYism is a global phenomenon and the
by marvin 6y ago
Yes - GP is right. When they say regulation, they mean preventing market forces from building as much prices allow. This NIMBYism is a global phenomenon and the root cause.
All the other factors certainly contribute, but cheap credit only affects how much the most desperate buyer is able to pay. This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap.
Building much more is the only fundamental solution, as this will reduce the proportion of desperate buyers. But of course local democracy prevents that - meaning, the problem persists indefinitely and we’re only wasting time discussing it.
- piva00 6y ago> cheap credit only affects how much the most desperate buyer is able to pay I disagree with this statement, cheap credit allows banks to offer longer term mortgages and buyers able to afford a larger principal with the same per-month cost, pushing the prices upwards due to keeping payments low on a per-month basis, due to low interests and longer term plans. This definitely pushes the price of all market upwards. It's a similar effect to tuition costs in the US, cheap credit, bankruptcy laws make them pretty safe for banks to take risk, flooding the market and allowing universities to hike prices. Building is fundamental, but cheap credit has an upwards pressure in price, magnifying the effect. All in all, I completely agree with your take on the solution. Build fucking more, population and specially cities have grown quite a lot on the past 3-4 decades, we still live with most dwellings built then than now.
- ihyfhgyfhth 6y agoI agree with you. The interest rate is the "price" of money. Central banks controlling the interest rate effectively practice price controls for debt. Much has been written about price controls, but fundamentally they create inefficiencies. Unfathomable amounts of debt have been completely misallocated in pursuit of whatever the goal of interest rate control has been.
- youngtaff 6y agoIn the UK, house construction companies buy up huge tracts of land and then build at a rate that keeps house prices high. Profit margin at the publicly listed UK house builders in around 30%
- johbjo 6y ago> This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap. The point is that cheap credit (mortgage regulation) significantly raises the upper bound on this limit.