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The big problem with housing markets is that external/international investors who do not intend to use it to stay are dumping money into the market. They dont c
by windex 5y ago
The big problem with housing markets is that external/international investors who do not intend to use it to stay are dumping money into the market. They dont care about valuations in the near term. They use houses like currency.
- seanmcdirmid 5y agoSpeculation from international investors is problem a problem, but not the only problem. In the USA, we have some speculation from abroad, but most of our problem is internal, e.g. from techies with a lot more of buying power than most middle class, coupled with cheap money that lets buyers leverage a lot more than they should. I assume Vancouver and Toronto have similar problems as well. I predict that the bubble won't pop so much as inflation will continue at an increased rate until housing prices look sane again (effectively turning everyone else but home owners into losers, more than a bit unfair).
- deleted 5y ago[deleted]
- imtringued 5y agoThis is because of liquidity preference. A tenant or a building on a plot of land makes the property less liquid. Almost all property has liquidity preference, however it gets especially bad with money(buy food), land and housing because they are necessary to meet basic human needs. If the return on the property is lower than the owners liquidity preference he will not rent it out and instead keep it liquid (empty). This also applies to people. Training makes an employee less liquid so training will only be done if the return exceeds liquidity preference. This basically means the employee has to carry the cost of liquidity (subsidized through unemployment benefits and paying for your own education).