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This is an Australian article, where I am. House prices are, I can confirm, insane. And I've always wondered whether it isn't a bit of a scam, really. Not a de

This is an Australian article, where I am. House prices are, I can confirm, insane. And I've always wondered whether it isn't a bit of a scam, really. Not a deliberate scam, just one that we've all fallen in to. [0] People buy a house for $1m and then they're pleased as punch when a few years later it's 'worth' $1.5m. But what's the point of it being worth $1.5m? Because now if you want to move, the house that you have to buy is worth proportionally more. So at what point does anyone get to keep the money?! The only ones that win are the banks. [0]: Except me, because I never bought a house, and now I'm 46 and I rent. :-/

mrslave 3y ago
It's the slave morality for an inflation-based economy.
nordsieck 3y ago
> So at what point does anyone get to keep the money?! You get to keep the money when you move to a less expensive area. Or you retire and downsize.
- richev 3y ago
  Not if you end up having to help your children buy their house(s).
  - shiroiuma 3y ago
    Problem solved: don't have children! (Just look at the current birthrates.)
- tuatoru 3y ago
  ... and no-one does that, to a first approximation.
- monkeydreams 3y ago
  > You get to keep the money when you move to a less expensive area. Or you retire and downsize. I live in a satellite township to one of the poorest suburbs in Melbourne, Australia. My house is tiny, too small for the four of us, and has cost us nearly $100k just to make it weather-tight (also with $10k of solar panels). So, in total, we have spent nearly $800k for a small home that is too small for our needs. If I were to move somewhere less expensive I would not be able to do my job. As it is I have to spend 3 hours a day (minimum, some days it can be up to 5 hours if there are train issues) commuting to my place of work. Australia is a huge country with a handful of large cities with amenities and only hundreds of small towns which do not. The only places where housing is on par with US towns (i.e. 150k-300k) may be in the middle of the outback, 10 hours drive from the nearest city, and be so ramshackle and run-down as to be unlivable.
- lawn 3y ago
  It's very, very rare that people move to a less expensive area or downsize. The exception is when you're too old to take of your house. I talked to a friend of mine and pointed out that if they sold their house in the city they could move to the inexpensive part of the country where I live and basically retire and live off investment returns. But it didn't even register as an option.
- rascul 3y ago
  Or when you finish paying it off, and don't move somewhere else right away, you get to keep the money you would have been spending.
iopq 3y ago
That's when you move to the Philippines and retire
- weakfish 3y ago
  Ah yes, and drive up the costs for the local Filipinos…
  - iteratethis 3y ago
    An unintended summary of the article? Adding people drives up costs?
  - iopq 3y ago
    You mean give away your money to the locals? Who do you think those costs go to?
    - munksbeer 3y ago
      Those costs go to some rich locals, and the wealth divide grows. I'm not against people moving around, I would love to go live in Portugal eventually, but the Portuguese at the moment are quite angry at the cost of their housing.
      - iopq 3y ago
        You'd be contributing to the local economy by buying local groceries, going to local restaurants, bars, etc. Remember that rent is never 100% of your expenses
  - seanmcdirmid 3y ago
    You are injecting capital into their economy also, so it isn’t just bidding up the local real estate market. A lot of Southeast Asian locales are also overbuilt on housing, so adding a few expats into a luxury tower isn’t going to influence the housing market for locals very much. Plus, the Philippines has laws against foreigners owning land (they can only buy a condo in a building where 60% of the units are owned by locals). The biggest problem with retiring abroad is Medicare doesn’t transfer, so you have to fund your own medical care (and family you can’t see as often).
deleted 3y ago
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kortilla 3y ago
You get to sell and it and capture the gains when you retire to somewhere outside of the city. It might even let you retire much sooner.
- dools 3y ago
  Prices go up there too, though. We moved to a little tiny town in the middle of nowhere in 2020 and our house has nearly doubled in value.
  - kortilla 3y ago
    They go up but it doesn’t matter because you’ve more than made up for it in the higher cost market. When someone from SF sells their $2.5 million dollar home to retire to Orlando, it doesn’t really matter if Orlando median prices recently doubled from $200k to $400k.
    - dools 3y ago
      Rich people cashing out of higher value markets and/or investing in lower value markets is what drives the price up though. Someone in Orlando who bought a house at $200k might feel excited that their house is worth $400k but it’s irrelevant because if they wanted to move house then wherever they might like to move has also increased in price.
      - kortilla 3y ago
        So? The discussion is about how you’re better off being in the top end market. The people who spent their life in Orlando or wherever else that had normal housing are at the whims of people coming from crazy housing markets
- shiroiuma 3y ago
  So you retire to some rural community where there's no services, and the local hospital has either closed or has terrible service because all the competent nurses and doctors have left, right when you're getting old and need a lot more healthcare services.
solumunus 3y ago
In very simple language. You had a loan for just under a million and now when you sell you have an extra $500k equity which you can use as a deposit to secure better terms on the next house, or have the next jump be bigger. In the hypothetical environment where house values did not increase it’s very unlikely you’d be in a position to make a large jump after just a few years because you would have barely made a dent in the loan through your monthly payments. Because you own the house via loan, house prices going up 20% could easily mean your equity going up 100-200%. That’s the key thing that means you’re in a better position than the static house price environment.
- dools 3y ago
  No it doesn't work like that at all. I bought a house at the end of 2020 for $430k with a loan of $337k. I can't borrow more than that now, my real income hasn't increased, I still have the same sorts of liabilities and expenditures that I had then. So even though my house is now worth maybe $700k, if I want to move, I have to find a house that I can buy for $700k. I have paid off something like $20k, so maybe I could find a house for $720k and move into it. Thus the only way I can move into a bigger/better house is to move somewhere that $720k gets you something bigger/better than in my current location. But guess what? House prices are up everywhere. You might be able to find some lucky arbitrage opportunity, but you're not going to get any sort of noticeable increase in quality and size. The advantage of owning a house versus renting is therefore not that you benefit from the rising price of houses, but that your buying power moves with the market and your "rent" is limited to the interest you pay on your loan (because you're paying down the principal as well). When you're renting, you're flushing your money down the toilet plus trying to save enough for a deposit relative to a market price that accelerates well beyond almost everyone's capacity to save.
  - dataflow 3y ago
    > your buying power moves with the market and your "rent" is limited to the interest you pay on your loan (because you're paying down the principal as well). The "because you're paying down the principal as well" seems like a red herring, no? If you bought a house for $10.00 and paid $100.00/month, it'd still be worth it even if none of that went to the principal. Heck, even if your house became worthless too, it'd still be worth it! > When you're renting, you're flushing your money down the toilet plus trying to save enough for a deposit relative to a market price that accelerates well beyond almost everyone's capacity to save. How do people make such a broad generalization without looking at any numbers? Shouldn't the costs and benefits of this depend on factors like the mortgage/interest rates? Is there a reason to believe that it's a net benefit regardless of the interest rate?
vladvasiliu 3y ago
> But what's the point of it being worth $1.5m? Because now if you want to move, the house that you have to buy is worth proportionally more. But if you move to a cheaper area, say because you now work from home, or for whatever reason you don't need to be in the expensive one anymore, the difference has also proportionately increased. I also think the situation is crazy (specifically in France, where I live, too). But I don't see an easy way out. Regular people owe way too much to their banks to be able to accept a drastic decline in prices.
- petre 3y ago
  WFH won't last and prices won't decrease unless there's pressure to do so (less demand). There isn't going to be less demand unless 1. we're not having children and 2. the country keeps immigrants out. So it's a debatable decision. By moving out of major cities one could gain by not having to breathe the polluted air but then they lose on commuting costs and time wasted commuting, unless they work in agriculture where the pay is usually crap.
epistasis 3y ago
One way to think about this is about how the fruits of everyone's labor gets split, much like a tribe deciding who gets what part of the animal after a hunt. By creating systemic housing shortages that enable rampant speculation and incentivize hoarding and "investment" in non-productive real estate ownership, we are deciding that real estate owners deserve a bigger share of the output of our labor. When a majority of the voters in a country have most of their wealth in housing assets, this is merely those with the greatest vote deciding to use regulatory capture to enrich themselves, directly at the expense of those who do not own.
ehnto 3y ago
It's also surprising to me how much cost of construction has increased. I look at a new house plan, and I consider our centuries of building experience. Is this really the best value we can provide? After all the advancements in process and technology, and scale of resource farming, we now build houses from wood and plasterboard at 10x the cost of a bricks and mortar home from a few decades ago? Land is expensive for sure, but why isn't building dirt cheap? You could wax about the market, but does that matter if we as a society are this terrible at building homes for our citizens? There is a perversion of the economics, and society suffers for it, but it is still a social problem to solve. Something we could write policy to fix. But we are slaves to the dollar so we won't do anything until the market breaks entirely.
- Dr_Birdbrain 3y ago
  Construction is expensive because it requires labor, and labor is expensive.
  - ehnto 3y ago
    I understand that, but it means that labour cost has increased faster than we have improved our process of building homes, even though the finished product uses cheaper materials and has worse outcomes. I would like to look into timeframes of home start to completion to know if we are faster at building now, my gut feeling from friends and family is that getting a home built takes as long if not longer, but I can't back that up. Regardless, still a major societal problem to fix. Are wages needing to be higher because housing is more expensive? If we had a cooler housing market, would people be happy being paid less as they could afford the same standard of living with less?
    - ip26 3y ago
      The Baumol Effect may be at play. If over time the average worker has become twice as productive (farm combines, computers, factory robots) but construction workers have only become one-and-a-half times as productive, then construction grows more expensive relative to other goods and services. It's very counter-intuitive, but in essence labor is reallocated to its most productive applications, so if a certain type of labor does not get more productive while others do, labor is moved to other applications (unless you are willing to pay more for less)
jojobas 3y ago
Not everything got more expensive proportionally. Somehow apartments go up much slower, and so do rural home-on-a-hectars. Many people seem to have invested in leveraged 2-3 urban properties, they don't need to move out from them, they can just reap their 3x growth over 10 years, pay out their loans and retire. I'd say the whole thing is a failure on legislators' behalf. Capital gains tax discounts (up to 100% if you've lived a year in each of your houses), unquarantined tax deductions for interest and upkeep, low land taxes, probably many more. All that while importing ridiculous quantities of low-pay workers. But hey, how good is GDP growth.
xkekjrktllss 3y ago
>And I've always wondered whether it isn't a bit of a scam, really. Karl Marx showed us exactly how the scam works over 150 years ago and his analysis on the accumulation of capital has never been disputed.
- JumpCrisscross 3y ago
  > his analysis on the accumulation of capital has never been disputed Within a Malthusian, i.e. zero or close to zero real growth, economy. And assuming no wealth transfers, e.g. welfare and taxation. Or bankruptcies and recessions, i.e. where accumulated "fake" capital is destroyed. Or limits to economies of scale, i.e. where "the larger capitals beat the smaller" [1], e.g. diminishing marginal returns or even antitrust. [1] https://en.wikipedia.org/wiki/Capital_accumulation#Marxist_concept https://en.wikipedia.org/wiki/Capital_accumulation#Marxist_c...
  - xkekjrktllss 3y ago
    What? What does Malthus have to do with Marx? What are you smoking?
    - JumpCrisscross 3y ago
      > What does Malthus have to do with Marx? Overaccumulation ("when the rate of profit is greater than the rate of new profitable investment outlets in the economy") is analogous to starvation (population growth > food supply growth). It turns out we were able to both increase food supply more than Malthus expected and the profitable investment outlets more than Marx expected. (We're also better at moderating population growth and destroying surplus capital than either expected. Both predicted proximate doom where it didn't appear.) Malthusianism and Marxism are also both discredited (albeit not useless) economic models from empirical and theoretical perspectives.
      - xkekjrktllss 3y ago
        I'll take that as "nothing." Marx's analysis on the accumulation of capital has nothing to do with Malthus. You haven't even answered my question. Why would I waste my time? That said, Marx was a 19th century economist. Just like every other 19th century economist, he did not have a time machine and did not predict neoliberalism or modern financialized economies, which are still in their first test run. Hold your horses, sweetheart.
farhanhubble 3y ago
What's more insane is that these houses have tiny rooms, poor build quality and lack basic fittings like pull out kitchen storage. You get a giant cardboard box for half a million.
- epistasis 3y ago
  Don't forget the land, you get the land and a spot to live close to everything around it. This is often the true source of increased imbalance between wages and housing costs: increases in land values.
angarg12 3y ago
The housing crisis of 2008 was probably one of the most economically destructive events in Spain, where I'm from. On the runup to 2008, you would hear stories of people buying a home and it going up 10-20% year over year. You'd literally be an idiot not to buy the most expensive home you could afford as fast as you could (facilitated by 100% mortgages from banks). The rest is history. People were flipping homes and making bank until the financial sector melted down, and then they couldn't. These days prices still haven't recovered to their peak level. People might not be getting those mind boggling ROI buying homes, but in general is more affordable to do so, and many people seem happy about it.
Mistletoe 3y ago
People that downsize to tiny or old homes win. The only way to win is not play the game and move to somewhere in the Midwest. > The phrase "Kobayashi Maru" has entered the popular lexicon as a reference to a no-win scenario. The term is also sometimes used to invoke Kirk's decision to "change the conditions of the test."
Gareth321 3y ago
> So at what point does anyone get to keep the money?! The only ones that win are the banks. When they retire and downsize. The housing market is a scheme designed to funnel money from the young to the old. That’s why they keep voting for policies which keep house prices high. It’s not uncommon in many countries for the older generations, who bought their first homes for peanuts, to own multiple homes. They’re doing really well out of this chaos. All while young people are having to delay families because they can’t afford rent, let alone an apartment or home.
ix101 3y ago
> So at what point does anyone get to keep the money?! When it's inherited. No doubt inheriting a large sum helps people trade up to a better property, and park a new range rover out front.
fulafel 3y ago
It's bidding against other people for access to scarce desireable urban housing in presence of cheap credit. I think it's a scam only if you fool yourself into thinking it's an investment rather than consumption with a bit of all-eggs-in-one-basket speculation.
Justsignedup 3y ago
The way it works. You buy a house. It grows in value. You then use that value as a down payment on a bigger better house that you now pay as much as rent for monthly. And you multiplied your wealth and have a wonderful place to live. When you retire you sell that house, buy your kids a down payment, and yourself a place in a low cost of living area. And now you enjoy the fruits of your life's labor till you die. But this all relies on population growth and a lack of better housing options. A. K. A. House prices generally always go up.
- MattPalmer1086 3y ago
  The way it used to work. Now, you just about manage to buy a tiny starter home in your late 30s or 40s. You just about pay it off by the time you retire if you're lucky. You could never afford to get a bigger house. Or you're in a shared ownership scheme because you could never buy the whole small flat you "purchased"...
  - Justsignedup 3y ago
    this is true. Being 39 I realized I still can't pay down that down payment because I don't have a vast amount of money I was able to save up, being in a HCOL area, and even if I do get a loan, I won't be able to pay it off before I retire (If I live long enough). And every time I save another chunk, the cost goes up so much more that the chunk I saved may as well have been zero, so I need to use that money to live by this point. Not to mention that mortgage gets more and more unaffordable. It is a horrible spiral, and I have no idea what I can do about it, other than get richer parents.
    - MattPalmer1086 3y ago
      The solution I found was to move to a lower cost of living area. I also changed to contracting which paid more. The combination let me buy a very small house. I couldn't afford it now though, I'd have to move even further away...
      - 3y ago
MattPalmer1086 3y ago
Right! I keep saying I want house prices to fall so I can buy a nicer one! Apparently human psychology works in such a way that people tend to feel richer if their house goes up in value and they spend more as a consequence. People are weird...
sshine 3y ago
> now I'm 46 and I rent. :-/ I’m 38 and I rent. I was ready to buy a house last year, but I got cold feet. It seemed like everyone selling was stuck going to where they wanted, depending on a buyer to relieve them of their commitment. I think we mistake “buying” with “loaning”. I don’t have anywhere near 100% of a home’s cost in cash. Do I want tax exemption for committing to paying debt for a decade or two? Sure! Do I want to be stuck living somewhere that is either insanely priced and easy to sell, or affordable and hard to sell? Nope! I’ll buy a property when I’m ready to go Minecraft on the sucker.
ssss11 3y ago
Investors with multiple properties can enter and exit the market as they choose.. buy the lows, sell the highs. But more importantly is a safe haven. When everything else is going to shit there are more people wanting to buy a house in Australia than houses for them to buy(and it’s most concentrated for areas like Sydney, Melbourne). For those with one house… your point is very valid. A lot of stress for a questionable return.
alternative_a 3y ago
> The only ones that win are the banks. The system by design or “a good turn of fortune for bankers” by nature concentrates actual wealth.
SilasX 3y ago
>So at what point does anyone get to keep the money?! If the rental prices are really low relative to buying the units outright, then you put the proceeds in an investment account, and pay a portion of the returns to rent.

mrslave 3y ago

It's the slave morality for an inflation-based economy.

nordsieck 3y ago

> So at what point does anyone get to keep the money?! You get to keep the money when you move to a less expensive area. Or you retire and downsize.

richev 3y ago
Not if you end up having to help your children buy their house(s).
- shiroiuma 3y ago
  Problem solved: don't have children! (Just look at the current birthrates.)
tuatoru 3y ago
... and no-one does that, to a first approximation.
monkeydreams 3y ago
> You get to keep the money when you move to a less expensive area. Or you retire and downsize. I live in a satellite township to one of the poorest suburbs in Melbourne, Australia. My house is tiny, too small for the four of us, and has cost us nearly $100k just to make it weather-tight (also with $10k of solar panels). So, in total, we have spent nearly $800k for a small home that is too small for our needs. If I were to move somewhere less expensive I would not be able to do my job. As it is I have to spend 3 hours a day (minimum, some days it can be up to 5 hours if there are train issues) commuting to my place of work. Australia is a huge country with a handful of large cities with amenities and only hundreds of small towns which do not. The only places where housing is on par with US towns (i.e. 150k-300k) may be in the middle of the outback, 10 hours drive from the nearest city, and be so ramshackle and run-down as to be unlivable.
lawn 3y ago
It's very, very rare that people move to a less expensive area or downsize. The exception is when you're too old to take of your house. I talked to a friend of mine and pointed out that if they sold their house in the city they could move to the inexpensive part of the country where I live and basically retire and live off investment returns. But it didn't even register as an option.
rascul 3y ago
Or when you finish paying it off, and don't move somewhere else right away, you get to keep the money you would have been spending.

iopq 3y ago

That's when you move to the Philippines and retire

weakfish 3y ago
Ah yes, and drive up the costs for the local Filipinos…
- iteratethis 3y ago
  An unintended summary of the article? Adding people drives up costs?
- iopq 3y ago
  You mean give away your money to the locals? Who do you think those costs go to?
  - munksbeer 3y ago
    Those costs go to some rich locals, and the wealth divide grows. I'm not against people moving around, I would love to go live in Portugal eventually, but the Portuguese at the moment are quite angry at the cost of their housing.
    - iopq 3y ago
      You'd be contributing to the local economy by buying local groceries, going to local restaurants, bars, etc. Remember that rent is never 100% of your expenses
- seanmcdirmid 3y ago
  You are injecting capital into their economy also, so it isn’t just bidding up the local real estate market. A lot of Southeast Asian locales are also overbuilt on housing, so adding a few expats into a luxury tower isn’t going to influence the housing market for locals very much. Plus, the Philippines has laws against foreigners owning land (they can only buy a condo in a building where 60% of the units are owned by locals). The biggest problem with retiring abroad is Medicare doesn’t transfer, so you have to fund your own medical care (and family you can’t see as often).

deleted 3y ago

[deleted]

kortilla 3y ago

You get to sell and it and capture the gains when you retire to somewhere outside of the city. It might even let you retire much sooner.

dools 3y ago
Prices go up there too, though. We moved to a little tiny town in the middle of nowhere in 2020 and our house has nearly doubled in value.
- kortilla 3y ago
  They go up but it doesn’t matter because you’ve more than made up for it in the higher cost market. When someone from SF sells their $2.5 million dollar home to retire to Orlando, it doesn’t really matter if Orlando median prices recently doubled from $200k to $400k.
  - dools 3y ago
    Rich people cashing out of higher value markets and/or investing in lower value markets is what drives the price up though. Someone in Orlando who bought a house at $200k might feel excited that their house is worth $400k but it’s irrelevant because if they wanted to move house then wherever they might like to move has also increased in price.
    - kortilla 3y ago
      So? The discussion is about how you’re better off being in the top end market. The people who spent their life in Orlando or wherever else that had normal housing are at the whims of people coming from crazy housing markets
shiroiuma 3y ago
So you retire to some rural community where there's no services, and the local hospital has either closed or has terrible service because all the competent nurses and doctors have left, right when you're getting old and need a lot more healthcare services.

solumunus 3y ago

In very simple language. You had a loan for just under a million and now when you sell you have an extra $500k equity which you can use as a deposit to secure better terms on the next house, or have the next jump be bigger. In the hypothetical environment where house values did not increase it’s very unlikely you’d be in a position to make a large jump after just a few years because you would have barely made a dent in the loan through your monthly payments. Because you own the house via loan, house prices going up 20% could easily mean your equity going up 100-200%. That’s the key thing that means you’re in a better position than the static house price environment.

dools 3y ago
No it doesn't work like that at all. I bought a house at the end of 2020 for $430k with a loan of $337k. I can't borrow more than that now, my real income hasn't increased, I still have the same sorts of liabilities and expenditures that I had then. So even though my house is now worth maybe $700k, if I want to move, I have to find a house that I can buy for $700k. I have paid off something like $20k, so maybe I could find a house for $720k and move into it. Thus the only way I can move into a bigger/better house is to move somewhere that $720k gets you something bigger/better than in my current location. But guess what? House prices are up everywhere. You might be able to find some lucky arbitrage opportunity, but you're not going to get any sort of noticeable increase in quality and size. The advantage of owning a house versus renting is therefore not that you benefit from the rising price of houses, but that your buying power moves with the market and your "rent" is limited to the interest you pay on your loan (because you're paying down the principal as well). When you're renting, you're flushing your money down the toilet plus trying to save enough for a deposit relative to a market price that accelerates well beyond almost everyone's capacity to save.
- dataflow 3y ago
  > your buying power moves with the market and your "rent" is limited to the interest you pay on your loan (because you're paying down the principal as well). The "because you're paying down the principal as well" seems like a red herring, no? If you bought a house for $10.00 and paid $100.00/month, it'd still be worth it even if none of that went to the principal. Heck, even if your house became worthless too, it'd still be worth it! > When you're renting, you're flushing your money down the toilet plus trying to save enough for a deposit relative to a market price that accelerates well beyond almost everyone's capacity to save. How do people make such a broad generalization without looking at any numbers? Shouldn't the costs and benefits of this depend on factors like the mortgage/interest rates? Is there a reason to believe that it's a net benefit regardless of the interest rate?

vladvasiliu 3y ago

> But what's the point of it being worth $1.5m? Because now if you want to move, the house that you have to buy is worth proportionally more. But if you move to a cheaper area, say because you now work from home, or for whatever reason you don't need to be in the expensive one anymore, the difference has also proportionately increased. I also think the situation is crazy (specifically in France, where I live, too). But I don't see an easy way out. Regular people owe way too much to their banks to be able to accept a drastic decline in prices.

petre 3y ago
WFH won't last and prices won't decrease unless there's pressure to do so (less demand). There isn't going to be less demand unless 1. we're not having children and 2. the country keeps immigrants out. So it's a debatable decision. By moving out of major cities one could gain by not having to breathe the polluted air but then they lose on commuting costs and time wasted commuting, unless they work in agriculture where the pay is usually crap.

epistasis 3y ago

One way to think about this is about how the fruits of everyone's labor gets split, much like a tribe deciding who gets what part of the animal after a hunt. By creating systemic housing shortages that enable rampant speculation and incentivize hoarding and "investment" in non-productive real estate ownership, we are deciding that real estate owners deserve a bigger share of the output of our labor. When a majority of the voters in a country have most of their wealth in housing assets, this is merely those with the greatest vote deciding to use regulatory capture to enrich themselves, directly at the expense of those who do not own.

ehnto 3y ago

It's also surprising to me how much cost of construction has increased. I look at a new house plan, and I consider our centuries of building experience. Is this really the best value we can provide? After all the advancements in process and technology, and scale of resource farming, we now build houses from wood and plasterboard at 10x the cost of a bricks and mortar home from a few decades ago? Land is expensive for sure, but why isn't building dirt cheap? You could wax about the market, but does that matter if we as a society are this terrible at building homes for our citizens? There is a perversion of the economics, and society suffers for it, but it is still a social problem to solve. Something we could write policy to fix. But we are slaves to the dollar so we won't do anything until the market breaks entirely.

Dr_Birdbrain 3y ago
Construction is expensive because it requires labor, and labor is expensive.
- ehnto 3y ago
  I understand that, but it means that labour cost has increased faster than we have improved our process of building homes, even though the finished product uses cheaper materials and has worse outcomes. I would like to look into timeframes of home start to completion to know if we are faster at building now, my gut feeling from friends and family is that getting a home built takes as long if not longer, but I can't back that up. Regardless, still a major societal problem to fix. Are wages needing to be higher because housing is more expensive? If we had a cooler housing market, would people be happy being paid less as they could afford the same standard of living with less?
  - ip26 3y ago
    The Baumol Effect may be at play. If over time the average worker has become twice as productive (farm combines, computers, factory robots) but construction workers have only become one-and-a-half times as productive, then construction grows more expensive relative to other goods and services. It's very counter-intuitive, but in essence labor is reallocated to its most productive applications, so if a certain type of labor does not get more productive while others do, labor is moved to other applications (unless you are willing to pay more for less)

jojobas 3y ago

Not everything got more expensive proportionally. Somehow apartments go up much slower, and so do rural home-on-a-hectars. Many people seem to have invested in leveraged 2-3 urban properties, they don't need to move out from them, they can just reap their 3x growth over 10 years, pay out their loans and retire. I'd say the whole thing is a failure on legislators' behalf. Capital gains tax discounts (up to 100% if you've lived a year in each of your houses), unquarantined tax deductions for interest and upkeep, low land taxes, probably many more. All that while importing ridiculous quantities of low-pay workers. But hey, how good is GDP growth.

xkekjrktllss 3y ago

>And I've always wondered whether it isn't a bit of a scam, really. Karl Marx showed us exactly how the scam works over 150 years ago and his analysis on the accumulation of capital has never been disputed.

JumpCrisscross 3y ago
> his analysis on the accumulation of capital has never been disputed Within a Malthusian, i.e. zero or close to zero real growth, economy. And assuming no wealth transfers, e.g. welfare and taxation. Or bankruptcies and recessions, i.e. where accumulated "fake" capital is destroyed. Or limits to economies of scale, i.e. where "the larger capitals beat the smaller" [1], e.g. diminishing marginal returns or even antitrust. [1] https://en.wikipedia.org/wiki/Capital_accumulation#Marxist_concept https://en.wikipedia.org/wiki/Capital_accumulation#Marxist_c...
- xkekjrktllss 3y ago
  What? What does Malthus have to do with Marx? What are you smoking?
  - JumpCrisscross 3y ago
    > What does Malthus have to do with Marx? Overaccumulation ("when the rate of profit is greater than the rate of new profitable investment outlets in the economy") is analogous to starvation (population growth > food supply growth). It turns out we were able to both increase food supply more than Malthus expected and the profitable investment outlets more than Marx expected. (We're also better at moderating population growth and destroying surplus capital than either expected. Both predicted proximate doom where it didn't appear.) Malthusianism and Marxism are also both discredited (albeit not useless) economic models from empirical and theoretical perspectives.
    - xkekjrktllss 3y ago
      I'll take that as "nothing." Marx's analysis on the accumulation of capital has nothing to do with Malthus. You haven't even answered my question. Why would I waste my time? That said, Marx was a 19th century economist. Just like every other 19th century economist, he did not have a time machine and did not predict neoliberalism or modern financialized economies, which are still in their first test run. Hold your horses, sweetheart.

farhanhubble 3y ago

What's more insane is that these houses have tiny rooms, poor build quality and lack basic fittings like pull out kitchen storage. You get a giant cardboard box for half a million.

epistasis 3y ago
Don't forget the land, you get the land and a spot to live close to everything around it. This is often the true source of increased imbalance between wages and housing costs: increases in land values.

angarg12 3y ago

The housing crisis of 2008 was probably one of the most economically destructive events in Spain, where I'm from. On the runup to 2008, you would hear stories of people buying a home and it going up 10-20% year over year. You'd literally be an idiot not to buy the most expensive home you could afford as fast as you could (facilitated by 100% mortgages from banks). The rest is history. People were flipping homes and making bank until the financial sector melted down, and then they couldn't. These days prices still haven't recovered to their peak level. People might not be getting those mind boggling ROI buying homes, but in general is more affordable to do so, and many people seem happy about it.

Mistletoe 3y ago

People that downsize to tiny or old homes win. The only way to win is not play the game and move to somewhere in the Midwest. > The phrase "Kobayashi Maru" has entered the popular lexicon as a reference to a no-win scenario. The term is also sometimes used to invoke Kirk's decision to "change the conditions of the test."

Gareth321 3y ago

> So at what point does anyone get to keep the money?! The only ones that win are the banks. When they retire and downsize. The housing market is a scheme designed to funnel money from the young to the old. That’s why they keep voting for policies which keep house prices high. It’s not uncommon in many countries for the older generations, who bought their first homes for peanuts, to own multiple homes. They’re doing really well out of this chaos. All while young people are having to delay families because they can’t afford rent, let alone an apartment or home.

ix101 3y ago

> So at what point does anyone get to keep the money?! When it's inherited. No doubt inheriting a large sum helps people trade up to a better property, and park a new range rover out front.

fulafel 3y ago

It's bidding against other people for access to scarce desireable urban housing in presence of cheap credit. I think it's a scam only if you fool yourself into thinking it's an investment rather than consumption with a bit of all-eggs-in-one-basket speculation.

Justsignedup 3y ago

The way it works. You buy a house. It grows in value. You then use that value as a down payment on a bigger better house that you now pay as much as rent for monthly. And you multiplied your wealth and have a wonderful place to live. When you retire you sell that house, buy your kids a down payment, and yourself a place in a low cost of living area. And now you enjoy the fruits of your life's labor till you die. But this all relies on population growth and a lack of better housing options. A. K. A. House prices generally always go up.

MattPalmer1086 3y ago
The way it used to work. Now, you just about manage to buy a tiny starter home in your late 30s or 40s. You just about pay it off by the time you retire if you're lucky. You could never afford to get a bigger house. Or you're in a shared ownership scheme because you could never buy the whole small flat you "purchased"...
- Justsignedup 3y ago
  this is true. Being 39 I realized I still can't pay down that down payment because I don't have a vast amount of money I was able to save up, being in a HCOL area, and even if I do get a loan, I won't be able to pay it off before I retire (If I live long enough). And every time I save another chunk, the cost goes up so much more that the chunk I saved may as well have been zero, so I need to use that money to live by this point. Not to mention that mortgage gets more and more unaffordable. It is a horrible spiral, and I have no idea what I can do about it, other than get richer parents.
  - MattPalmer1086 3y ago
    The solution I found was to move to a lower cost of living area. I also changed to contracting which paid more. The combination let me buy a very small house. I couldn't afford it now though, I'd have to move even further away...
    - 3y ago

MattPalmer1086 3y ago

Right! I keep saying I want house prices to fall so I can buy a nicer one! Apparently human psychology works in such a way that people tend to feel richer if their house goes up in value and they spend more as a consequence. People are weird...

sshine 3y ago

> now I'm 46 and I rent. :-/ I’m 38 and I rent. I was ready to buy a house last year, but I got cold feet. It seemed like everyone selling was stuck going to where they wanted, depending on a buyer to relieve them of their commitment. I think we mistake “buying” with “loaning”. I don’t have anywhere near 100% of a home’s cost in cash. Do I want tax exemption for committing to paying debt for a decade or two? Sure! Do I want to be stuck living somewhere that is either insanely priced and easy to sell, or affordable and hard to sell? Nope! I’ll buy a property when I’m ready to go Minecraft on the sucker.

ssss11 3y ago

Investors with multiple properties can enter and exit the market as they choose.. buy the lows, sell the highs. But more importantly is a safe haven. When everything else is going to shit there are more people wanting to buy a house in Australia than houses for them to buy(and it’s most concentrated for areas like Sydney, Melbourne). For those with one house… your point is very valid. A lot of stress for a questionable return.

alternative_a 3y ago

> The only ones that win are the banks. The system by design or “a good turn of fortune for bankers” by nature concentrates actual wealth.

SilasX 3y ago

>So at what point does anyone get to keep the money?! If the rental prices are really low relative to buying the units outright, then you put the proceeds in an investment account, and pay a portion of the returns to rent.